o- 


'*  * 


^ 

54TH  CONGRESS,  )  SENATE.  (  DOCUMENT 

1st  Session.       \  \     No.  314. 


GOVERNMENT  DEBT  OF  THE  PACIFIC  RAILROADS. 


NOTES  OF  HEARINGS 


BEFORE  THE 


COMMITTEE  ON  PACIFIC  RAILEOADS 


OF  THE 


SENATE  OF  THE  UNITED  STATES 


ON   THE 


SUBJECT  OF  THE  INDEBTEDNESS  OF  THE  PACIFIC 
RAILROADS  TO  THE  GOVERNMENT. 


IN  THE  SENATE  OF  THE  UNITED  STATES, 

June  9,  1896. 

Resolved,  That  the  hearings  had  before  the  Select  Committee 
on  the  Pacific  Railroads,  not  heretofore  printed  as  documents, 
be  printed  for  the  use  of  the  Senate. 
Attest:  WM.  R.  Cox,  Secretary. 


WASHINGTON: 

GOVERNMENT    PRINTING    OFFICE. 

1896. 


University  of  California  •  Berkeley 


GOVERNMENT  DEBT  OF  THE  PACIFIC  RAILROADS. 


NOTES  OF  HEAEINGS  BEFOEE  THE  COMMITTEE  ON 
PACIFIC  EAILEOADS  OF  THE  SENATE  OF  THE  UNITED 
STATES  ON  THE  SUBJECT  OF  THE  INDEBTEDNESS  OF 
THE  PACIFIC  EAILEOADS  TO  THE  GOVEENMENT. 

WASHINGTON,  D.  C.,  February  1, 1896. 

The  committee  met  at  10  o'clock  a.  m. 

Present,  the  chairman  (Mr.  Gear)  and  Senators  Stewart,  Davis,  Frye, 
and  Faulkner. 

The  chairman  stated  that  the  counsel  and  secretary  of  the  Union 
Pacific  Eailroad  Company  were  present  and  that  the  committee  would 
be  glad  to  hear  what  they  had  to  say. 

UNION  PACIFIC  KAILEOAD  COMPANY. 
STATEMENT  OF  MR.  WINSLOW  S.  PIERCE. 

Mr.  WINSLOW  S.  PIERCE,  counsel  for  the  reorganization  committee 
of  the  Union  Pacific  Eailroad  Company,  addressed  the  committee.  He 
said : 

Mr.  CHAIRMAN  AND  GENTLEMEN  :  I  assume  that  what  the  commit- 
tee will  want  me  to  do  is  to  give  a  brief  summary  of  the  reorganiza- 
tion proposed  to  the  security  holders  of  the  Union  Pacific  Eailroad 
Company.  The  reorganization  committee  consists  of  Louis  Fitzgerald, 
Jacob  Schiff,  Chauncey  M.  Depew,  T.  Jefferson  Coolidge,  jr.,  Marvin 
Hughitt,  and  Oliver  Ames,  second.  The  committee  was  organized  for 
the  purpose  of  submitting  to  the  security  holders  a  plan  for  the  settle- 
ment of  its  debt.  It  was  organized  at  the  request  of  a  large  number 
of  security  holders.  As  this  committee  is  aware,  its  plan  was  promul- 
gated upward  of  a  year  and  a  half  after  the  time  that  the  Union 
Pacific  Eailroad  went  into  the  hands  of  receivers,  becoming  utterly 
insolvent  and  bankrupt.  The  receivers  were  appointed  in  a  main 
cause,  instituted  by  stockholders  and  creditors,  and  subsequently  in 
mortgage  foreclosure  suits  covering  divisions  of  the  Union  Pacific  Eail- 
road. The  first  of  the  series  was  that  instituted  under  the  Union  Pacific 
first-mortgage  lien  extending  from  Omaha  to  Ogden.  Subsequently 
the  trustees  of  the  Kansas  Pacific  consolidated  mortgage  (a  mortgage 
covering  the  entire  division  and  including  the  terminus  at  Kansas  City 
and  the  terminus  at  Denver,  Colo.,  394£  miles)  filed  a  foreclosure  bill, 
and  that  part  of  the  property  was  placed  in  the  hands  of  the  same 
receivers.  At  about  the  same  time  the  same  officers,  as  trustees  of  the 
Denver  Pacific  first  mortgage  (extending  from  Denver  to  Cheyenne 
and  constituting  1,800  miles),  filed  their  bill  of  foreclosure  and  receiv- 
ers were  appointed  in  the  same  way. 


2  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

The  CHAIRMAN.  The  same  receivers? 

Mr.  PIERCE.  Yes.  The  Kansas  Pacific  consolidated  mortgage  was 
anterior  to  the  first  mortgage  on  the  general  line.  At  the  outset  there 
were  only  three  receivers,  who  had  been  appointed  in  the  main  cause 
by  Judge  Foster.  The  receivership  was,  on  the  application  of  the 
Government,  without  entry  of  formal  appearance,  extended  so  as  to 
embrace  the  five  receivers.  Messrs.  Clark,  Mink,  and  Anderson  were 
the  original  receivers,  and  Messrs.  Doane  and  Coudert  were  the  receiv- 
ers appointed  at  the  instance  and  by  the  request  of  the  Attorney- 
General.  The  Government  lien  extends  from  a  point  in  the  city  of 
Omaha  (exclusive  of  the  terminals  in  that  city  and  of  the  Omaha 
Bridge)  to  the  western  terminus  of  the  main  line  of  the  Union  Pacific — 
a  point  5  miles  west  of  Ogden. 

Senator  FRYE.  Has  there  been  any  adjudication  as  to  whether  the 
Government  lien  covers  any  of  these  terminals? 

Mr.  PIERCE.  The  Supreme  Court  has  held  that  the  lien  is  cotermi- 
nous with  the  parts  of  the  line.  The  line  was  drawn  very  sharp  with 
reference  to  the  Kansas  Pacific.  That  Kansas  Pacific  line  extends 
from  the  initial  point  as  fixed  in  the  act  (a  straight  line  between  the 
two  States  of  Kansas  and  Missouri)  to  a  point  394  miles  west,  that 
being  the  extent  of  road  on  which  subsidy  bonds  were  issued.  From 
that  point  on  to  Denver  no  subsidy  bonds  were  issued,  and  on  that 
part  of  the  road  there  has  been  no  Government  lien.  Then,  again, 
between  Cheyenne  and  Denver  there  is  no  Government  lien. 

These  two  parts  of  the  main  line  of  the  Union  Pacific  Railroad  con- 
stitute a  mileage  of  350  miles  on  which  there  is  no  Government  lien. 
In  addition  to  the  other  property  of  the  Union  Pacific  Eailroad  that  is 
excluded  from  the  Government  lien  are  the  Omaha  Bridge,  the  termi- 
nus in  Kansas  City,  the  terminus  at  Omaha,  the  terminus  at  Denver, 
the  lands  granted  in  aid  of  construction,  and  probably  the  equipment 
of  the  property. 

The  property  thus  excluded  from  the  Government  lien  is  of  very  large 
value.  On  that  property  there  rest  two  mortgages — a  first  mortgage 
on  what  is  known  as  the  Omaha  Bridge ;  and  on  the  Kansas  City  ter- 
minus, the  Denver  terminus,  and  the  350  miles  of  road  not  included 
within  the  Government  lien,  as  well  as  on  the  entire  Kansas  division, 
there  rests  the  Kansas  Pacific  consolidated  mortgage,  which  is  junior 
to  tlie  first  mortgage  issued,  junior  also  to  the  Government  lien,  and 
junior  to  the  Denver  extension  mortgage. 

Senator  FRYE.  How  as  to  the  Omaha  terminals? 

Mr.  PIERCE.  They  are  not  covered  by  the  Government  lien.  They 
are  covered  by  the  first  mortgage,  and  they  are  possibly  also  covered 
by  the  sinking-fund  mortgage,  the  sinking-fund  mortgage  being  junior 
to  the  first  mortgage  and  to  the  Government  lien  on  the  main  line,  but 
being  an  exclusive  mortgage  on  the  remaining  unsold  lands  granted  in 
aid  of  the  construction  of  the  Union  Pacific  main  line. 

Senator  FRYE.  On  those  unaided  portions  of  the  Union  Pacific  Rail- 
road— on  the  Omaha  terminus,  the  Denver  terminus,  and  the  Omaha 
Bridge — how  does  the  indebtedness  secured  by  the  mortgage  compare 
with  the  actual  cost? 

Mr.  PIERCE.  The  indebtedness  secured  by  the  mortgage  in  the  case 
of  the  Omaha  Bridge  is  much  less  than  the  cost  of  construction.  After 
the  bridge  had  been  completely  built  at  a  very  large  cost,  it  was  to  a 
great  extent  destroyed,  and  had  to  be  rebuilt.  The  cost,  therefore,  has 
been  very  large. 

Senator  FRYE.  I  change  the  question  so  as  to  make  it  apply  to  the 
value,  not  the  cost. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    KAILROADS.  3 

Mr.  PIERCE.  I  think  there  is  in  no  man's  mind  any  doubt  that  the 
Omaha  Bridge  bonds  will  not  represent  anything  in  excess  of  the  value 
of  the  bridge.  On  the  contrary,  they  are  probably  below  the  actual 
value  of  the  bridge.  The  bridge  and  terminals  would  aggregate  a  very 
large  value,  running  well  up  into  six  or  seven  or  eight  or  nine  millions. 
I  have  here  no  accurate  estimate  of  values,  but  that  estimate  is  in 
course  of  preparation  at  the  request  of  a  member  of  the  House  com- 
mittee, and  I  will  furnish  the  same  statement  to  the  Senate  committee. 
The  Omaha  Bridge  and  approaches  are  called  5  miles,  roughly. 

The  indebtedness  on  the  main  line  from  Omaha  to  a  point  5  miles 
west  of  Ogden,  at  which  point  there  is  no  terminus,  it  being  the  point 
of  junction  with  the  Central  Pacific  under  an  arrangement  with  the 
Union  Pacific 

The  CHAIRMAN.  For  which  the  Central  Pacific  pays  the  Union  Pacific 
$20,000  a  year? 

Mr.  PIERCE.  Yes.  The  mortgage  which  is  prior  to  the  Government's 
lien  on  the  line  between  Omaha  and  Ogden  is  $27,299,000.  The  mileage 
is  a  little  over  1,000  miles  (1,040).  There  is  now  outstanding  from  the 
first  mortgage  on  the  Omaha  Bridge  $508,000,  and  on  the  second  mort- 
gage $1,056,000,  a  portion  of  which,  $322,000,  is  held  by  the  receivers, 
thus  reducing  the  real  amount  of  the  debt  on  the  Omaha  Bridge  renewal 
mortgage  to  about  $900,000. 

The  sinking  fund  8-per-cent  mortgage  secures  bonds  now  outstanding 
to  the  amount  of  $3,330,000.  These  are  the  mortgages  on  the  main 
line  and  on  the  Omaha  Bridge.  Subject  only  to  this  first  mortgage  on 
the  main  line  proper  is  the  Government  lien  for  an  equal  amount, 
$27,229,000. 

Senator  FRYE.  That  does  not  include  interest? 

Mr.  PIERCE.  No;  that  is  the  principal.  The  entire  amount  of  the 
principal  of  the  Government  debt  is  $33,539,512,  the  excess  over  the 
amount  which  I  first  stated  being  the  Government  debt  resting  on  the 
Kansas  division,  $6,303,000. 

Senator  FRYE.  The  interest  on  that  being  nearly  $7,000,000? 

Mr.  PIERCE.  The  interest  may  be  stated  at  about  nineteen  millions 
and  a  half,  after  deducting  the  sinking  fund  payments,  which  have 
been  pretty  large  on  the  Union  Pacific.  I  think  that  the  figures  made 
by  the  Government  officials  and  those  made  by  the  receivers  do  not 
materially  diverge. 

Senator  FAULKNER.  About  fifty-two  millions  in  all? 

Mr.  PIERCE.  Yes,  about  fifty-two  millions.  That  is,  with  interest, 
after  deducting  the  sinking  fund.  After  the  application  of  the  sinking 
fund,  the  debt  for  principal  and  interest  will  be  about  $52,000,000. 

Now,  upon  the  Kansas  division,  out  to  the  314-mile  post,  Government 
bonds  were  issued  at  the  same  rate  per  mile  as  the  first  mortgage.  The 
entire  amount  issued  and  outstanding,  including  these  first-mortgage 
bonds,  is  $6,303,000  of  each  debt.  I  do  not  know  that  I  should  trouble 
the  committee  with  any  elaborate  statement  of  these  figures,  as  it  is 
inconceivable  that  they  should  be  borne  in  mind  as  the  result  of  a  mere 
oral  statement. 

The  plan  of  reorganization  contains  a  statement  of  the  securities  pro- 
posed to  be  issued  by  the  new  company.  It  also  gives  the  amount  of 
outstanding  securities  of  the  old  company  for  which  it  is  intended  to 
make  provision. 

The  CHAIRMAN.  With  accrued  interest? 

Mr.  PIERCE.  The  interest  on  the  first-mortgage  bonds  is  taken  care 
of  by  a  syndicate  which  finances  the  reorganization.  The  Government 


4  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

interest  it  is  proposed  to  take  care  of  by  the  issue  of  securities.  The 
plan  of  reorganization  provides  a  pretty  wide  margin  of  approach 
through  which  it  is  proposed  to  take  care  of  the  Government  indebted- 
ness. The  proposition  is  to  issue  a  mortgage  of  one  hundred  millions 
to  cover  not  only  the  aided  part  of  the  Union  Pacific  property,  but  also 
the  unaided  part  of  the  property — the  lands,  the  terminals,  the  equip- 
ments, the  bridges,  etc.,  all  the  property  that  now  belongs  to  the  Union 
Pacific  and  that  is  subject  to  the  lien  of  any  of  its  mortgages  on  phys- 
ical property.  All  this  is  to  be  embraced  in  the  reorganization  by  a 
provision  of  new  bonds — 4  per  cent  fifty-year  gold  bonds.  The  cardinal 
principle  of  the  reorganization  scheme  is  that  no  new  4  per  cent  bonds 
shall  be  issued  in  exchange  for  a  security  where  the  old  mortgage  does 
not  contribute  the  full  value.  I  want  to  impress  tha.t  upon  the  minds 
of  the  committee,  because  it  is  a  fundamental  consideration. 

The  Government  of  the  United  States  will  not  complain  that  4  per 
cent  bonds  are  issued  in  exchange  for  the  $33,000,000  of  first-mortgage 
debt,  which  is  ahead  of  the  Government  lien,  if  the  interest  is  reduced; 
nor  will  the  Government  of  the  United  States  complain  if,  in  the  offer 
that  we  make  to  it,  we  press  the  Government  debt  up  to  an  equality  with 
the  first  mortgage.  Therefore  these  two  elements  will  be  found  elimi- 
nated from  the  consideration  of  the  justice  of  this  scheme  of  reorgani- 
zation. The  only  question  beyond  that  is  whether  the  new  property 
(new  as  far  as  the  Government  is  concerned)  that  is  contributed  to  this 
new  first  mortgage  is  of  a  value  equal  to  the  nominal  amount  of  bonds 
to  be  issued  against  it.  In  the  statement  which  I  propose  to  make,  at 
the  request  of  the  House  committee,  it  will  be  made  to  appear  that  not 
only  is  this  so — that  is,  that  the  value  of  this  property  is  as  great  as  the 
amount  of  bonds  to  be  issued  against  it — but  that  it  is  largely  in  excess 
of  that  amount,  so  that  the  new  property  contributed  to  the  mortgage 
increases  the  value  of  the  Government  lien  and  of  the  lien  of  the  first- 
mortgage  bonds.  The  only  dilution  of  the  security  is  in  the  proposition 
of  pressing  the  Government  up  to  an  equality  with  the  first-mortgage 
bonds. 

Senator  FRYE.  You  say  that  you  propose  to  issue  one  hundred  millions 
of  bonds.  I  suppose  that  this  syndicate  proposes  to  take  possession  of 
the  entire  Union  Pacific  Eailroad — its  terminals  and  all  its  property? 

Mr.  PIERCE.  Yes. 

Senator  FRYE.  And  then  to  pay  off  all  the  present  incumbrances  by 
issuing  $100,000,000  of  new  bonds? 

Mr.  PIERCE.  Yes ;  clean  them  all  up. 

Senator  FRYE.  Over  what  number  of  miles  of  railroad  do  the 
$100,000,000  of  bonds  extend? 

Mr.  PIERCE.  Over  the  railroad  proper — 1,827  miles,  plus  the  mileage 
which  the  reorganization  committee  will  avail  itself  of,  and  which  is 
now  embraced  in  mortgage  trusts. 

Senator  FRYE.  Does  that  statement  include  the  terminals'? 

Mr.  PIERCE.  It  does  not.  It  does  not  include  any  of  those  elements 
of  value,  except  the  350  miles  of  the  road  outside  of  the  Government 
lien  and  the  270  miles  of  branch  lines.  All  these  other  properties 
(which  are  valued  at  about  $18,000,000)  and  the  lands  given  to  the 
railroad  are  subject  to  mortgages. 

The  CHAIRMAN.  There  are  mortgages  issued  on  the  land? 

Mr.  PIERCE.  Yes. 

The  CHAIRMAN.  The  same  as  on  the  Omaha  Bridge? 

Mr.  PIERCE.  Yes ;  they  are  all  covered  by  mortgages.  I  suppose  this 
is  as  brief  a  way  of  stating  it  as  any  other  way.  Thirteen  millions  of 


GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS.  5 

bonds  are  proposed  to  be  reserved  for  extraordinary  requirements,  for 
unforeseen  contingencies,  and  for  future  corporate  use. 

Senator  FRYE.  That  is,  out  of  one  hundred  millions  of  bonds,  you 
reserve  thirteen  millions. 

Mr.  PIERCE.  Yes;  thirteen  millions  are  to  be  reserved  for  the  cor- 
poration. 

The  CHAIRMAN.  Will  they  be  held  in  the  Treasury  ? 

Mr.  PIERCE.  Yes;  unless  there  is  some  controlling  emergency  at 
present  and  before  the  reorganization  is  completed,  but  that  is  not 
expected.  $32,842,000  of  the  new  4  per  cent  bonds  will  be  issued  for 
the  present  first  mortgage,  which  is  senior  to  the  Government  lien,  and 
$33,539,000  will  be  attributed  to  the  Government,  for  the  purpose  of 
taking  care  of  the  Government  debt  in  some  way.  They  will  under- 
write them  or  treat  them  in  some  way  so  as  to  dispose  of  the  Gov- 
ernment debt,  That  leaves  a  surplus  of  $20,618,000  in  bonds  to  be 
accounted  for.  These  bonds  it  is  proposed  to  issue  against  the  securi- 
ties which  are  now  outstanding,  covering  property  that  is  not  included 
in  the  Government  lien ;  and  if  that  property  has  a  value  greater  than 
the  amount  of  the  bonds  issued,  that  phase  of  the  reorganization  plan  is 
beyond  exception.  The  property  to  be  covered  by  this  $20,618.000  of 
bonds  is  the  Omaha  Bridge,  the  terminals  at  Kansas  City  and  Denver, 
the  lands  and  land  contracts  (valued  at  $19,000,000),  600  miles  of  road, 
including  350  miles  of  main  line,  and  also  the  equipment. 

Senator  FRYE.  Do  you  get  in  the  terminal  at  Omaha  Bridge  ? 

Mr.  PIERCE.  Yes ;  the  terminals  at  Kansas  City,  Denver,  and 
Omaha.  I  have  no  statement  of  the  actual  value  of  the  bridge  or  of  the 
terminals.  I  have  seen  the  statement  of  the  value  of  the  land  in  the 
receiver's  report. 

•     Senator  FRYE.  1  think  the  receivers  made  a  statement  in  their  report 
of  the  value  of  all  this  property. 

Mr.  PIERCE.  If  we  assume  that  the  350  miles  of  main  line  is  worth 
$20,000  a  mile  (and  we  can  not  very  well  assume  it  to  be  worth  less 
than  that,  as  the  Government  lien  is  subject  to  about  $20,000  a  mile), 
there  is  a  value  of  $7,000,000  there.  Then  assume  the  lands  to  be  worth 
what  the  receivers  value  them  at 

Senator  FAULKNER.  Is  that  valuation  less  the  mortgages'? 

Mr.  PIERCE.  No,  sir.  I  am  speaking  of  the  property.  We  take  care 
of  the  mortgages  under  the  reorganization  scheme ;  and  the  only  point 
that  the  committee  need  consider  is,  whether  the  property  contributed 
bears  a  proper  relation  of  value  to  the  new  bonds  issued  against  it. 

Senator  FRYE.  You  say  that  the  $100,000,000  will  be  fairly  repre- 
sented by  property  owned  by  the  Union  Pacific  Eailroad? 

Mr.  PIERCE.  Yes;  it  was  with  that  view  that  I  tried  to  divide  these 
bonds  up  into  three  classes,  so  that  the  committee  would  take  them  up 
in  their  separate  classes  and  see  clearly  whether  each  class  of  bonds 
represented  the  actual  value  of  the  property  contributed.  The  first  class 
is  the  bonds  issued  in  exchange  for  the  first-mortgage  bonds;  second, 
the  bonds  issued  to  cover  the  Government  claim,  and,  third,  the  bonds 
representing  property  not  covered  by  the  Government  lien.  We  have 
not  proposed  to  the  Government  that  it  shall  take  those  bonds,  but 
pur  purpose  has  been  to  make  our  plan  so  flexible  that  we  can  meet  any 
just  proposition  coming  from  the  Government,  as  I  assume  that  propo- 
sitions will  be  made  that  will  bear  a  proper  relation  to  the  financial  pos- 
sibilities of  the  property  and  that  will  be  relatively  just. 

The  CHAIRMAN.  And  all  these  separate  properties  are  to  be  merged 
in  the  general  mortgage  of  $100,000,000? 

Mr.  PIEBCE.  Yes. 


6  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  FRYE.  Yon  intend  to  keep  them  on  the  same  dead  level! 

Mr.  PIERCE.  Certainly. 

Senator  FRYE.  And,  your  corporation  having  that  in  view,  you  pro- 
pose that  the  United  States  shall  make  a  settlement  of  the  indebted- 
ness of  the  Union  Pacific  Railroad  at  some  price? 

Mr.  PIERCE.  Yes. 

Senator  FRYE.  The  proposition  to  come  from  you  and  to  be  accepted 
by  the  Government,  or  to  come  from  the  Government  and  be  accepted 
by  you  ? 

Mr.  PIERCE.  Yes,  sir;  I  do  not  mean  to  say  that  it  shall  be  neces- 
sarily payable  in  money,  but  on  some  terms. 

Senator  FRYE.  If  you  have  4  per  cent  bonds  based  upon  security 
ample  to  cover  the  amount,  what  is  the  difference  between  paying  the 
Government  debt  in  these  bonds  and  paying  it  in  actual  money  pro- 
cured by  the  sale  of  the  bonds? 

Mr.  PIERCE.  This  plan  contemplates  the  issue  of  bonds  applicable  to 
the  Government  debt  as  respects  the  principal  of  that  debt  and  not  as 
respects  the  accrued  interest.  There  is  a  further  phase  of  the  plan. 

Senator  FRYE.  Your  proposition  simply  covers  the  principal  of  the 
Government  debt. 

Mr.  PIERCE.  The  plan  includes  the  distribution  of  the  new  fifty-year 
4  per  cent  gold  bonds  and  then  the  distribution  of  stock  to  the  com- 
mon stockholders.  For  the  purpose  of  making  this  plan  a  financial 
success  and  of  meeting  the  interest  on  the  first-mortgage  bonds  which 
requires  to  be  paid  the  stockholders  are  called  upon  to  pay  an  assess- 
ment of  $15  a  share,  and  a  majority  of  them  have  already  consented 
to  do  so.  For  that  we  issue  preferred  stock.  The  feature  of  the  plan 
appertaining  to  the  Government  debt  is  this :  Bonds  reserved  for  settle- 
ment of  the  debt  to  the  United  States  and  for  extraordinary  require- 
ments, $35,755,000,  and  $20,804,000  of  preferred  stock;  or  say,  in  round 
numbers,  an  amount  of  4  per  cent  bonds  equal  to  the  principal  of  the 
Government  debt  and  an  amount  of  preferred  stock  equal  to  the  interest 
on  the  Government  debt.  These  are  reserved  as  a  fund  by  which  we 
hope  to  be  able  to  settle  with  the  Government. 

Senator  FRYE.  The  only  advantage  that  this  preferred  stock  has  is 
that  dividends  shall  be  paid  upon  it  prior  to  dividends  being  paid  on  the 
common  stock. 

Mr.  PIERCE.  Yes;  up  to  4  per  cent  per  annum. 

The  CHAIRMAN.  You  did  not  answer  Senator  Frye's  question,  as  to 
the  difference  between  paying  the  bonds  to  the  Government  and  paying 
cash  to  be  procured  by  the  sale  of  the  bonds. 

Mr.  PIERCE.  I  thought  that  my  explanation  would  cover  that.  If 
the  Government  should  desire  to  participate  in  this  plan  of  reorganiza- 
tion by  taking  bonds  and  stock,  that  would  be  satisfactory  to  the  reor- 
ganization committee.  Objection  to  that  has  been  made  and  it  has 
been  urged  upon  us  that  the  Government  does  not  want  to  be  a  stock- 
holder. Now,  if  the  bonds  are  to  be  underwritten  they  would  have  to 
be  underwritten  at  the  price  at  which  the  Government  would  be  willing 
to  sell  them.  That  is  to  say,  the  market  for  so  large  an  amount  of 
bonds  would  be  very  limited.  It  would  be  a  very  large  venture  and 
it  would  be  difficult  therefore  to  market  the  bonds  at  what  they  would 
be  worth  to  the  Government  as  an  interest-bearing  investment. 

Senator  FRYE.  You  have  figured  out  somewhere,  I  take  it,  an  ascer- 
tainment of  what  you  estimate  to  be  the  value  of  all  this  property  over 
which  this  $100,000,000  is  to  be  extended.  What  is  all  that  property 
worth,  according  to  your  own  estimates?  Is  it  worth  $150,000,000! 


GOVERNMENT    DEBT    OF    THE   PACIFIC    RAILROADS.  7 

Mr.  PIERCE.  Our  own  estimates  would  not  make  it  as  much  as  that. 
The  road  is  a  seasoned  road,  a  good  road,  but  it  is  very  difficult  to 
reach  the  cost  of  duplicating  it.  That  would  be  an  element  requiring 
consideration.  The  main  line  is  bonded  now  to  the  amount  of  about 
$50,000  a  mile. 

Senator  FRYE.  That  would  show  it  to  be  worth  $100,000,000. 

Mr.  PIERCE.  No;  a  little  over  $50,000,000. 

Senator  FAULKNER.  How  about  the  rolling  stock? 

Mr.  PIERCE.  The  rolling  stock  is  probably  not  subject  to  the  Govern- 
ment lien. 

Senator  FAULKNER.  What  we  are  trying  to  get  at  is  an  estimate  of 
the  value  of  the  property. 

Mr.  PIERCE.  These  items  are  on  my  memorandum. 

Senator  FRYE.  What  I  want  to  get  at  is  this :  Suppose  I  want  to  buy 
a  bond  and  suppose  you  have  a  4  per  cent  bond  to  sell.  Of  course  the 
first  inquiry  I  make  is,  What  is  there  behind  that  bond  on  which  I 
may  reasonably  count1?  Now,  you  say  that  everything  connected  with 
the  road  will  not  be  worth  $100,000,000,  but  you  are  going  to  issue  bonds 
to  the  amount  of  $100,000,000.  How  do  you  propose  to  make  those 
bonds  good  to  the  people  who  are  to  buy  them,  if  they  find  on  inquiry 
that  there  is  not  sufficient  property  behind  the  bonds? 

Mr.  PIERCE.  They  have  already  bonds  on  the  property  in  most  cases; 
and  our  settlement  is  with  those  who  (like  the  Government)  have 
already  their  interest  in  the  property. 

Senator  FRYE.  Suppose  we,  in  behalf  of  the  Government,  say,  "No, 
we  don't  want  to  have  anything  to  do  with  your  infernal  road;  we  have 
had  enough  of  it;  we  want  to  settle  this  debt,  and  we  will  settle  it  for 
so  much  money."  Suppose  we  say  that  we  will  settle  it  for  $30,000,000. 
Now,  in  order  to  get  the  $30,000,000  you  have  to  sell  bonds. 

Mr.  PIERCE.  Precisely. 

Senator  FRYE.  How  do  you  propose  to  make  those  bonds  good  to  a 
purchaser  if,  on  examination,  he  finds  that  there  is  not  property  enough 
behind  them  to  justify  that  amount  of  bonds'? 

Mr.  PIERCE.  We  do  not  anticipate  that  contingency.  The  additional 
properties  put  into  the  mortgage  will  make  these  bonds  salable  at  some 
reasonable  price.  We  do  not  expect  to  sell  them  at  par,  nor  do  we 
expect  to  be  able  to  sell  any  large  amount  of  them  at  a  price  beyond  90 
or  80. 

The  CHAIRMAN.  You  propose  to  bond  the  road  at  its  utmost  earning 
ability  to  pay  4  per  cent.  The  foundation  of  the  mortgage  is  the  earn- 
ing ability  of  the  road  to  pay  4  per  cent  on  these  bonds? 

Mr.  PIERCE.  Yes. 

Senator  FRYE.  Do  you  not  now  make  a  proposition  to  the  Govern- 
ment that  you  will  give  the  Government  so  much  in  4  per  cent  bonds 
and  so  much  in  preferred  stock  for  a  full  settlement  of  all  the  indebt- 
edness, or  that  you  will  give  to  the  Government  so  much  money  for  a 
full  settlement? 

Mr.  PIERCE.  I  do  not  think  that  these  are  the  only  possibilities.  They 
should  be  presented  as  simply  alternatives.  In  the  House  committee, 
when  a  question  something  like  that  was  asked  me,  I  told  them  that  the 
reorganization  committee  would  include  the  principal  of  the  Government 
debt  in  first-mortgage  bonds  at  3  per  cent,  and  would  then  give  a  second 
lien  on  the  property  for  the  amount  of  interest— say  $20,000,000  at  2 
per  cent — so  that  at  the  end  of  fifty  years  the  interest  obligation  would 
be  discharged. 

The  CHAIRMAN.  In  other  words,  there  would  be  no  compounding  of 
interest? 


8  GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

Mr.  PIERCE.  No  compounding  of  interest. 

Senator  -STEWART.  Has  the  interest  on  the  first-mortgage  bonds  been 
in  default  since  the  road  went  into  the  hands  of  receivers? 

Mr.  PIERCE.  The  interest  on  the  first-mortgage  bonds  has  been  in 
default,  and  there  is  now  a  default  upon  a  large  amount.  The  last 
coupon  that  has  been  paid  on  the  first-mortgage  bonds  on  the  main  line 
was  paid  the  other  day  out  of  the  earnings  of  the  property. 

Senator  DAVIS.  Do  you  mean  on  the  Government  bonds? 

Mr.  PIERCE.  No;  I  mean  the  interest  on  the  first-mortgage  bonds. 

Senator  STEWART.  State  the  aggregate  amount  of  the  default  in 
interest. 

Mr.  PIERCE.  Two  coupons  on  the  first-mortgage  bonds  to  the  amount 
of  $1,632,000;  and  then  there  are  four  coupons  in  default  on  the  eastern 
and  middle  division  bonds. 

Senator  STEWART.  Have  you  cash  on  hand  to  meet  that  default? 

Mr.  PIERCE.  Yes ;  but  there  was  not,  when  I  left  New  York,  cash 
enough  on  hand  to  justify  the  application  for  the  payment  on  the  main 
line.  On  the  eastern  and  middle  divisions  we  expect  to  pay  a  coupon 
very  shortly. 

Senator  STEWART.  My  inquiry  was  to  find  out  as  to  how  the  road  is 
doing  now. 

Mr.  PIERCE.  We  are  pressing  the  application  for  payment  of  the 
coupons  as  rapidly  as  the  earnings  of  the  road  seem  to  justify. 

Senator  DAVIS.  The  appearance  of  the  Government  entered  in  the 
Union  Pacific  suit  is  merely  special  ? 

Mr.  PIERCE.  On  the  face  of  the  record  it  seems  to  me  that  it  is  an 
absolute  appearance  in  the  Ames  case. 

Senator  DAVIS.  Has  the  Government  answered  in  that  case? 

Mr.  PIERCE.  No;  it  has  not  answered.  The  position  of  the  Govern- 
ment has  been,  so  far,  an  attempt  to  avoid  appearance,  but  to  get  so  far 
into  the  suit  as  was  necessary  in  order  to  get  receivers  who  should  rep- 
resent the  Government's  interests. 

Senator  DAVIS.  On  the  face  of  the  record  it  is  a  question. 

Mr.  PIERCE.  Yes ;  as  to  whether  the  Government  has  actually  ap- 
peared in  the  Ames  case.  In  our  case  (the  first-mortgage  foreclosure 
case)  there  has  been  no  appearance  whatever  on  the  part  of  the  Gov- 
ernment. 

Senator  FRYE.  But  the  Government  participated  in  the  appointment 
of  the  two  additional  receivers. 

Mr.  PIERCE.  The  first  appointment  was  of  Messrs.  Clark,  Mink,  and 
Anderson,  but  the  Attorney  -General  came  in  in  the  Ames  case  and  made 
application  for  the  appointment  of  two  others. 

Senator  FRYE.  Those  appointments  were  made  on  the  application  of 
the  Attorney- General,  representing  the  United  States. 

Mr.  PIERCE.  Yes.  The  only  additional  suggestion  that  I  want  to 
make  is  this.  The  reorganization  committee  has  received  the  assent 
of  a  very  large  majority  of  all  the  security  holders  of  the  Union  Pacific 
Railroad  to  its  plan  of  reorganization.  These  have  handed  in  their 
securities,  and  have  deposited  them  with  the  reorganization  committee; 
so  that  that  committee  acts  with  the  consent  of  about  65  per  cent  of 
all  the  outstanding  bonds  of  the  Union  Pacific  and  of  a  large  majority 
of  the  stock  of  the  company.  The  purpose  of  this  suggestion  is  to 
show  that  while,  heretofore,  there  has  been  no  opportunity  for  the 
Government  to  deal  with  the  security  holders  of  the  Union  Pacific 
Railroad  Company  in  a  compact  body,  that  opportunity  exists  now. 
They  are  all  linked  together,  and  have  conferred  a  common  authority 


GOVERNMENT   DEBT    OF    THE    PACIFIC   RAILROADS. 

on  this  reorganization  committee,  so  that  now,  if  the  Government  were 
simply  a  bondholder,  and  if  there  were  no  complications  by  reason  of 
the  Government  being  a  government,  we  would  have  no  difficulty  in 
completing  the  matter  and  reorganizing  the  property.  The  only  diffi- 
culty lies  in  the  fact  that  we  are  dealing  with  the  Government  of  the 
United  States,  and  not  with  a  class  of  bondholders  who  would  have  fewer 
complications  and  embarrassments  than  so  large  a  body  as  the  Govern- 
ment has.  If  the  situation  could  be  reduced  to  one  in  which  we  were 
dealing  exclusively  with  the  security  holders  of  the  company,  and  if 
the  Government  could  take  the  same  position  from  a  business  stand- 
point as  the  other  bondholders  take,  we  could  close  the  reorganization 
within  a  very  short  time. 

The  CHAIRMAN.  You  spoke  about  stock  in  the  settlement.  What  do 
you  value  that  stock  at? 

Mr.  PIERCE.  It  is  impossible  to  put  any  value  on  it,  Mr.  Chairman. 
The  stock  is  to  be  issued  to  first-mortgage  bondholders,  in  part  as  a 
bonus  to  induce  them  to  accept  this  reduction  of  interest. 

The  CHAIRMAN.  How  much  stock  is  to  be  given  to  each  bondholder? 

Mr.  PIERCE.  Fifty  per  cent. 

The  CHAIRMAN.  Practically  the  preferred  stock  will  control  the  future 
of  the  road. 

Mr.  PIERCE.  The  maximum  issue  is  expected  to  be  $75,000,000  of 
stock. 

The  CHAIRMAN.  Of  course  that  would  control  the  future  of  the  road. 

Mr.  PIERCE.  Yes,  sir. 

Senator  FRYE.  Has  the  syndicate  which  you  represent  presented  any 
bill  to  Congress? 

Mr.  PIERCE.  No,  sir. 

Senator  FRYE.  Is  there  a  bill  pending  from  the  Union  Pacific  Eailroad 
Company  covering  this  plan? 

Mr.  PIERCE.  There  is  a  bill  pending,  but  not  under  this  plan  of  reor- 
ganization. 

The  CHAIRMAN.  Do  you  represent  the  receivers  ? 

Mr.  PIERCE.  Not  the  receivers,  but  the  reorganization  committee. 

Senator  DAVIS.  The  receivers  do  not  object  to  this  plan,  do  they? 

Mr.  PIERCE.  No;  I  think  not.  I  think  that,  on  the  contrary,  they 
are  more  favorable  to  it  than  is  generally  supposed.  It  is  generally 
supposed  that  it  is  not  one  of  their  functions  to  hasten  the  reorganiza- 
tion, but  I  do  not  think  they  would  be  actuated  by  that  idea. 

THE  CENTRA!,  PACIFIC  RAILROAD   COMPANY. 

Mr.  Collis  P.  Huntington,  president  of  the  Southern  Pacific  Railroad, 
stated  that  Mr.  Tweed  was  present  as  counsel  for  the  Central  Pacific 
Railroad  Company  and  had  something  to  say  to  the  committee. 

STATEMENT  OF  MR.  TWEED. 

Mr.  TWEED  said: 

Mr.  CHAIRMAN  AND  GENTLEMEN  OF  THE  COMMITTEE:  The  situa- 
tion of  the  Central  Pacific  Railroad  Company  is,  in  some  respects, 
somewhat  more  simple  than  that  of  the  Union  Pacific  Railroad  Com- 
pany. It  is  simpler  in  respect  of  the  lines  of  road  covered  by  the  first 
obligation.  It  is  simpler,  in  some  respects,  in  regard  to  the  liens  which 
affect  the  various  portions  of  the  road.  And  possibly,  also,  the  matter 
is  somewhat  simplified  by  the  fact  that  the  Central  Pacific  Railroad 


10  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Company  is  to-day  a  going  concern,  meeting  readily  all  of  its  obliga- 
tions as  they  accrue,  and  threatened  only  (1  suppose  it  is  threatened) 
by  the  rapidly  approaching  maturity  of  the  subsidy  bonds  issued  by 
the  Government  and  by  the  obligations  on  the  part  of  the  company 
which  accrue  and  attach  as  the  Government,  from  time  to  time,  meets 
its  obligations  on  these  subsidy  bonds. 

But,  apart  from  that  question  of  its  relation  to  the  Government  sub- 
sidy bonds  and  to  the  obligations  arising  in  respect  of  those  bonds,  the 
company  is  a  going  concern,  meeting  fully  the  conditions  of  its  loan  and 
meeting  all  its  existing  obligations  in  relation  to  the  first  mortgage  and 
to  the  other  mortgages  on  its  property.  And,  as  I  say,  it  is  threatened 
only  by  the  imminence  of  the  obligations  arising  as  the  Government 
pays  off  its  subsidy  bonds.  So  that,  if  it  is  feasible  on  proper  terms  to 
make  an  arrangement  with  the  Government  in  respect  to  these  obliga- 
tions existing  from  the  company  to  the  Government  on  those  subsidy 
bonds,  there  will  be  no  disturbance  of  other  interests  that  relate  to  or 
grow  out  of  or  are  affected  by  the  Central  Pacific  llailroad  Company. 
Everything  will  go  through  without  disturbance  of  the  bonds,  or  stock, 
or  any  other  interest  connected  with  it,  provided  only  that  suitable 
arrangements  can  be  made  with  the  Government  for  giving  to  the  Gov- 
ernment whatever  there  is  to  give  to  it,  by  reason  of  the  obligations  we 
are  under  to  the  Government.  I  have  prepared  here  a  simple  state- 
ment which  perhaps  will  aid  the  committee  in  some  respects  in  relation 
to  the  Central  Pacific  loans,  and  the  several  liens  that  exist  upon  them, 
dividing  these  liens  between  the  aided  and  nonaided  lines. 

The  aided  lines,  in  respect  of  which  the  obligations  of  the  Govern- 
ment attach,  and  in  respect  of  which — primarily  at  any  rate — the  first 
mortgage  of  the  company  attaches,  are  the  line  from  Sacramento  run- 
ning to  a  point  5  miles  west  of  Ogden  and  the  line  running  from  Sacra- 
mento to  San  Jose.  These  roads  are  stated  severally,  because  at  the 
time  the  mortgage  bonds  were  issued  and  the  subsidy  bonds  were 
issued  they  were  owned  by  separate  companies,  the  Central  Pacific 
Company  owning  the  line  from  Sacramento  to  Ogden  and  the  Western 
Pacific  Company  owning  the  line  from  Sacramento  to  San  Jose,  the  first 
737  miles  in  length  and  second  123  miles  in  length.  The  Central  Pacific 
and  Western  Pacific,  however,  have  been  since  consolidated  into  the 
present  Central  Pacific.  These  two  lines  are  now  amalgamated  by  the 
consolidation  which  took  place  in  1870,  and  they  represent  the  obliga- 
tions of  the  company  so  far  as  the  first-mortgage  bonds  and  the  subsidy 
bonds  are  concerned.  On  the  line  from  Sacramento  to  Ogden  the  first- 
mortgage  bonds  to  which  subsidy  bonds  are  subordinate  are  $25,883,000. 
The  United  States  subsidy  bonds  of  course  are  for  a  like  amount.  On 
the  line  from  Sacramento  to  San  Jose  the  first-mortgage  bond  amounts 
to  $1,970,000,  with  a  like  amount  of  subsidy  bonds.  But,  by  reason  of 
circumstances  which  are  well  known  to  the  committee,  a  large  amount 
of  interest  has  accrued  on  these  subsidy  bonds  which  has  not  yet  been 
reimbursed  to  the  Government.  I  have  set  the  amount  of  it  (taken 
from  the  Government  debt  statement  of  October  1, 1895)  at  $32,868,669. 

The  CHAIRMAN.  In  the  event  of  a  settlement  it  would  have  to  be 
predicated  on  the  amount  that  will  be  due  to  the  Government  at  the 
maturing  of  these  bonds'? 

Mr.  TWEED.  I  think,  Mr.  Chairman,  that  the  settlement  which  we 
will  make  will  have  to  be  predicated,  as  between  the  Government  and 
ourselves,  on  the  running  forward  to  maturity  of  all  the  bonds,  with  the 
interest  that  will  be  paid  up  to  that  date.  The  Government  will  have 
6  per  cent  interest  to  pay  on  those  subsidy  bonds  until  1898  and  1899  j 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  11 

and,  of  course,  in  making  a  settlement  the  figures  will  have  to  be  based 
on  the  amount  which  the  Government  will  have  to  pay.  But,  as  it 
stands  to-day,  you  may  say  that  the  first  mortgage  represents  $27,800,000 
on  this  property  from  Ogden  to  Sacramento  and  from  Sacramento  down 
to  San  Jose,  and  that  the  second  lien,  represented  by  the  subsidy  bonds 
and  interest,  represents  about  $04,000,000. 

Senator  DAVIS.  These  subsidy  bonds  being  on  860  miles  of  road? 

Mr.  TWEED.  On  SCO  miles  of  road.  The  Senator  will  recollect  that 
the  occasion  of  this  comparatively  large  mileage  charge  on  the  Central 
Pacific  Railroad  was  the  distribution  of  subsidy  bonds  made  under  the 
acts  of  1862  and  1864  in  reference  to  the  rate  of  issue  on  different  por- 
tions of  the  line,  classified  with  reference  to  the  character  of  the  coun- 
try and  the  difficulties  of  construction,  these  rates  being  $16,000,  $32,000, 
and  $48,000  a  mile.  And  it  was  on  account  of  the  exceptional  diffi- 
culties of  construction  that  these  large  rates  of  subsidy  were  predicated. 
Of.  course  that  is  exaggerated  when  we  come  to  add  the  accrued  and 
unreimbursed  interest  which  has  arisen  in  relation  to  those  subsidy 
bonds. 

That  represents  the  situation,  primarily,  of  the  Government  to-day  in 
regard  to  the  aided  lines— 860  miles  of  road,  with  $27,800,000  ahead  of 
the  Government  debt,  and  with  $64,000,000  due  to  the  Government  on 
subsidy  bonds.  Of  course  I  should  qualify  this  statement  by  saying 
that  there  is  in  the  Treasury  a  sinking  fund  which  should  be  applied  in 
diminution  of  this  $64,000,000.  That  sinking  fund,  amounting  to 
$6,250,000,  reduces  the  Government  charge  net  to  about  $58,000,000. 

The  CHAIRMAN.  Based  on  present  calculations'? 

Mr.  TWEED.  Yes;  that,  if  run  forward  to  the  maturity  of  the  debt 
will  reach  a  figure  which  I  have  prepared  and  can  refer  to.  It  will 
bring  it  to  a  little  over  $60,000,000.  But  the  problem  which  you  will 
have  to  deal  with  in  reference  to  this  matter  is  practically  that  situa- 
tion. I  am  confining  myself  to  the  aided  lines,  and  without  reference 
to  the  nonaided  lines.  So  far  as  the  aided  lines  go,  with  reference  to 
which  the  lien  attaches  under  the  acts  of  1862  and  1864,  there  are  860 
miles  of  road  with  a  debt  of  $27,000,000  ahead  of  the  Government  debt 
and  with  $60,000,000  representing  the  principal  and  interest  of  the  Gov- 
ernment debt. 

Now,  in  addition  to  the  aided  lines  on  which  the  lien  attaches,  the 
Central  Pacific  Eailroad  Company  is  the  owner  of  certain  nonaided 
lines;  and  in  reference  to  these  nonaided  lines  I  may  say  that  they 
were  originally  separate  and  distinct  lines,  and  were  taken  into  the 
Central  Pacific  by  consolidation,  each  being  at  the  time  of  the  con- 
solidation subject  to  its  own  first-mortgage  lien — for  instance  the  San 
Joaquin  Valley  line,  from  Lathrop  to  Goshen,  running  south,  and  the 
California  and  Oregon  line,  from  Roseville  to  Oregon  boundary,  running 
north.  Both  these  lines  were  organized  by  different  companies  as 
separate  enterprises.  Each  one  had  issued  its  own  first-mortgage 
bonds,  which  were  outstanding.  And  in  that  situation  (with  their  own 
first-mortgage  bonds  already  issued  and  sold)  these  companies  were 
consolidated  into  the  Central  Pacific,  so  that  the  Central  Pacific  acquired 
the  nonaided  lines  subject  to  all  the  existing  mortgages  resting  upon 
them.  That  is  accurate  as  a  general  statement,  and  perhaps  ought 
to  be  qualified  in  one  way,  that  at  the  time  of  the  acquisition  of  the 
California  and  Oregon  line,  from  Roseville  north  to  the  Oregon  boundary, 
a  part  only  of  the  road  had  been,  in  fact,  constructed,  and  that  further 
bonds  were  issued  (but  under  the  old  mortgage)  as  against  the  new 
mileage.  The  first  mortgages  on  these  nonaided  lines  to  which  the 


12  GOVERNMENT   DEBT   OF    THE   PACIFIC    RAILROADS. 

Central  Pacific  Railroad  Company  became  subject  were  $765,000  on  the 
line  from  Oakland  to  Niles,  24  miles;  $6,080,000  on  the  line  from  Lathrop 
to  Gosh  en,  146  miles,  and  $10,340,000  on  the  line  from  Eoseville  to 
Oregon  boundary,  296£  miles. 

I  stop  here  in  my  statement  to  mention  the  land  grant,  estimated  at 
8,000,000  acres,  on  which  there  rests  primarily  the  balance  of  the  old 
Central  Pacific  land  mortgage  of  1870.  Senators  will  recollect  the  pro- 
vision of  the  acts  of  1862  and  1864,  which  required  a  sale  or  disposi- 
tion of  the  granted  lands  within  three  years  after  the  completion  of  the 
road,  which  provision,  the  Supreme  Court  held,  required  a  mortgage  to 
be  made  on  the  land  at  that  time.  In  1870  the  land  mortgage  was  made. 
Ten  millions  is  the  figure  of  it  that  I  have  in  my  mind.  That  mort- 
gage has  now  been  reduced,  by  reason  of  the  sale  of  lands,  etc.,  to 
$2,615,000,  and  perhaps  a  little  below  that  figure.  That  is  a  mortgage 
which  is  gradually  eating  itself  up  as  fast  as  the  land  can  be  sold  to 
retire  the  bonds. 

That  brings  us  down  to  the  one  blanket  mortgage  which  now  rests 
upon  these  properties,  subordinate,  of  course,  to  all  the  mortgages  and 
liens  to  which  I  have  already  referred — I  mean  the  Central  Pacific  5  per 
cent  bonds  of  1889— to  the  amount  of  $16,000,000.  That  mortgage  cov- 
ers all  these  local  lines,  and  terminal  properties,  and  real  estate  in  San 
Francisco,  Oakland,  and  Alameda,  the  steamers,  ferryboats,  and  every- 
thing— that  is,  all  the  San  Francisco  and  adjacent  terminal  property; 
for,  as  I  rather  think  the  Senators  know  already,  the  Central  Pacific 
aided  line, running  from  Ogden  to  Sacramento  and  running  from  Sacra- 
mento around  at  a  distance  from  San  Francisco  down  to  San  Jose,  does 
not  reach  San  Francisco  at  all.  The  Niles  and  Oakland  line  carries  it 
up  to  San  Francisco;  so  that  you  may  say  that  the  great  terminal  of 
the  property  is  at  San  Francisco.  Then  the  other  two  nonaided  lines 
are  the  two  arms — one  extending  north  to  the  Oregon  line,  and  the 
other  south,  through  the  San  Joaquin  Valley,  and  as  far  as  Goshen. 

Now,  that  represents  the  situation,  as  it  is  to-day,  of  the  various  lines 
of  the  company  and  of  the  various  liens  resting  on  them.  The  company 
is  in  a  position  in  which  it  is  able  to  carry  all  that  burden  currently, 
subject  only  to  the  possibility  of  making  an  arrangement  with  the  Gov- 
ernment, of  a  suitable  character,  by  which  its  obligations  to  the  Govern- 
ment can  be  properly  provided  for. 

That  raises,  of  course,  the  question  how  much  there  is  to  pay  with; 
how  much  this  property  earns  andean  be  fairly  expected  to  earn  in  the 
future.  I  think  that  we  all  agree  at  the  outset  that  whatever  there  is 
of  reasonably  to  be  anticipated  earnings  from  this  property  shall  go, 
and  is  to  go,  to  the  Government  in  fulfillment  of  the  obligations  of  the 
company  to  the  Government  in  such  form  and  manner  as  Congress  may 
determine ;  but  that  that  fund,  whatever  it  is,  is  to  go  to  the  benefit  of  the 
company,  either  by  capitalization  or  by  annual  payments,  in  whichever 
way  it  is  determined  by  Congress  that  these  contributions  shall  be 
made.  But  I  should  say  myself  (subject  to  your  opinion)  that  in  look- 
ing at  this  question  two  things  should  be  considered — that  the  pay- 
ment should  be  such  a  one  as  (looking  to  the  earnings  of  the  railroad 
in  the  past,  looking  at  the  general  situation,  the  hope  of  better  things 
in  the  future,  the  uncertainties  of  the  future,  the  possibility  of  poorer 
things,  but  also  the  possibility  of  the  growth  and  prosperity,  to  a  cer- 
tain extent,  of  the  railroad  interests  of  the  country)  shall  be  satisfac- 
tory to  the  company  and  as  shall  make  it  certain  that  there  shall  be  no 
failure  to  carry  out  any  plan  which  is  now  inaugurated. 

We  should  look  at  it  with  a  view  of  determining  accurately  what 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS.  13 

may  fairly  be  expected  in  the  future.  This  is  a  mere  suggestion  for 
your  consideration — as  to  whether  it  is  not  better  for  the  Government 
that,  in  the  green  years,  there  should  be  some  chance,  some  hope,  of 
return  to  the  stockholding  interest ;  some  opportunity  of  better  things, 
in  order  that  there  may  be  an  underlying  interest,  with  at  least  some- 
thing to  hope  for  when  we  come  to  the  dry  years.  If  there  is  a  loss  and 
an  insufficiency  in  certain  years  (as  of  course  there  will  be),  we  should 
know  that  we  assumed  that  there  must  be  dry  years,  and  that  there 
must  be  an  underlying  interest  to  carry  us  over  those  dry  years.  But 
these  are  mere  suggestions  which  I  make  to  you  for  your  consideration, 
and  in  order  that  .you  may  give  them  such  weight  as  you  may  deem 
proper. 

The  amounts  which  we  have  paid  to  the  Government  in  the  past,  under 
the  requirements  of  the  acts  of  1862  and  1864,  and  of  the  Thurman  Act 
of  1878,  have  been  for  the  last  six  years  as  follows,  beginning  at  1890. 
(This  is  the  whole  Government  requirement — the  half  tbat  goes  to  the 
bond  and  interest  account,  the  portion  that  goes  to  the  sinking  fund, 
and  the  5  per  cent  net  earnings  account,  embracing  everything  which 
up  to  the  present  we  are  called  upon  to  pay  to  the  Government) : 

1890 $523,000 

1891  (a  very  exceptional  year  which  has  not  returned  again) 613,  000 

1892 577,000 

1893 584,000 

1894 599,000 

1895  (about) 600,000 

Making  for  the  six  years  an  average  of  $583,000  as  the  contribution 
which  we  have  made  to  the  Government. 

During  these  years  the  net  earnings  of  the  property  (after  taking  out 
these  Government  requirements)  have  been  as  follows : 

1890 $898,611 

1891 2,444,000 

1892 861.000 

1893 784,000 

1894  and  1895  were  years  of  unusual  depression,  the  net  earnings 
being  in  1894  $144,000  and  in  1895  $42,000.  That  was  a  very  dry  year. 

Senator  FRYE.  You  are  giving  the  net  earnings  of  what? 

Mr.  TWEED.  Of  the  whole  Central  Pacific  aided  and  unaided  lines. 

Senator  FRYE.  Is  there  any  way  by  which  you  are  able  to  give  the 
net  earnings  of  that  part  of  the  Central  Pacific  on  which  the  Govern- 
ment has  a  lien? 

Mr.  TWEED.  I  have  not  the  information  here,  but  I  have  no  doubt  it 
can  be  given.  There  must  be  a  segregation  of  the  accounts  that  will 
enable  me  to  state  that.  But  I  have  given  the  income  of  the  whole 
Central  Pacific  property;  because  I  thought  that  whatever  proposition 
is  made  to  you  by  us  must  be  a  proposition  relating  to  all  the  property, 
and  must  embrace  all  the  property  that  the  Central  Pacific  Eailroad 
Company  controls — not  only  this  trunk  line  that  goes  from  Ogden  to 
San  Jose,  but  the  head  of  the  line  in  San  Francisco  which  controls  it, 
and  also  those  two  arms,  one  north  and  the  other  south,  which  are 
feeders  and  distributers  for  the  road. 

The  CHAIRMAN.  Still  I  think  it  desirable  that  the  net  earnings  of 
the  line  from  Ogden  to  Sacramento  and  from  Sacramento  to  San  Jose 
should  be  stated. 

Mr.  TWEED.  I  shall  have  that  statement  prepared  and  sent  to  the 
committee;  and  perhaps  it  would  be  fair  for  me  to  say  something  in 
connection  with  it.  It  is,  that  the  value  of  the  feeders  of  the  road,  as 


14  GOVERNMENT   DEBT   OF   THE   PACIFIC   KAILROADS. 

compared  with  the  trunk  line,  is  not  precisely  shown  by  the  distribu- 
tion of  actual  traffic  on  the  line,  because  the  trunk,  without  the  jinns, 
would  carry  much  less  traffic  than  it  does,  in  point  of  fact,  carry  when 
feeders  and  distributors  are  auxiliaries  to  it.  And  if  we  take  (as  of 
course  we  must  take,  in  making  such  a  statement)  the  transportation 
on  the  trunk  line  of  the  road,  we  should  include  in  it  much  traffic  that 
comes  to  the  main  line  by  reason  of  the  arms,  branches,  or  auxiliaries 
on  either  hand. 

Senator  DAVIS.  I  think  it  is  prorated  on  the  mileage  basis. 

Senator  FRYE.  The  Central  Pacific  is  now  leased  to  the  Southern 
Pacific.  I  do  not  mean  that  you  shall  give  us  the  earnings  of  the  Cen- 
tral Pacific  as  distinct  from  the  Southern  Pacific,  but  the  actual  earn- 
ings of  that  part  of  the  Central  Pacific  on  which  the  Government  has 
a  lien. 

Mr.  TWEED.  I  think  that,  under  the  lease,  that  very  statement  is 
required  as  between  the  Central  and  Southern  Pacific  companies.  I 
have  no  doubt,  however,  that  by  reason  of  its  relations  to  the  Govern- 
ment and  the  ascertainments  which  have  to  be  made  under  the  Thur- 
man  Act  not  only  as  to  Government  transportation,  but  also  as  to  the 
25  per  cent  of  net  earnings,  that  distinction  is  kept  in  the  accounts. 
The  25  per  cent  of  net  earnings  is  a  theoretical  factor  under  the  Thur- 
man  Act,  although  it  has  ceased  to  be  a  practical  factor  lately,  because 
the  second  half  of  the  Government  transportation  has  been  larger  than 
the  25  per  cent  of  net  earnings  amount  to,  so  that  we  settle  upon  the 
basis  of  one-half  Government  transportation  and  not  on  the  basis  of  net 
earnings.  Still,  for  the  purpose  of  ascertaining  the  25  per  cent  of  net 
earnings,  I  have  no  doubt  that  the  figures  can  be  found  which  repre- 
sent precisely  the  earnings  on  the  aided  lines. 

Now,  these  are  the  statements  of  the  whole  property.  I  have  given 
the  net  earnings  and  I  have  given  the  amounts  paid  under  the  Gov- 
ernment requirement.  The  average  for  six  years  of  the  Government 
requirements  was  $583,000,  and  the  average  net  earnings  for  the  same 
six  years  over  and  above  the  Government  requirements  were  $812,000. 
That  includes  the  exceptional  earnings  of  1891,  and  I  must  certainly 
submit  to  your  consideration  that  the  exceptional  and  abnormal  earn- 
ings of  a  single  year  are  hardly  to  be  considered,  even  in  connection 
with  averages.  But  I  have  taken  the  average  for  the  six  years,  includ- 
ing that  abnormal  year. 

Senator  FRYE.  Is  not  the  lowest  year  of  the  six  years  almost  as  abnor- 
mal as  the  highest? 

Mr.  TWEED.  No;  I  am  sorry  to  say  it  is  not.  If  it  were,  the  doctrine 
of  averages  should  apply.  So  I  have  stated  the  average  of  net  earn- 
ings for  the  six  years  from  I860  to  1865  as  $812,000,  and  the  average  of 
the  amount  paid  to  the  Government  under  the  Thurman  Act  as  $583,000. 
The  earnings  for  the  two  years  1894  and  1895  are  very  much  below  what 
the  earnings  should  be,  but  taking  five  of  these  years  and  leaving  off 
the  year  1891  the  result  is  $546,000  of  net  earnings  and  $577,000  of 
Government  requirements. 

Senator  STEWART.  You  have  got  in  two  pretty  dry  years.  What 
evidence  is  there  that  there  will  be  any  green  years  ? 

Mr.  TWEED.  I  do  not  know  anything  but  what  has  been. 

Mr.  HUNTINGDON  (president  of  the  Southern  Pacific  Bailroad).  These 
were  rather  financially  than  climatically  dry  years. 

Mr.  TWEED.  Whatever  has  been  found  to  be  the  really  normal  con- 
dition of  the  past  will  be  returned  to  in  the  future,  depending  upon  the 
development  of  the  country. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  15 

Now,  that,  as  I  say,  represents  what  seems  to  me  a  fair  average, 
$546,000  of  net  earnings  plus  $577,000  of  Government  requirement. 
That  makes  $1,125,000,  so  that  from  eleven  to  twelve  hundred  thousand 
dollars  a  year  may  be  considered  as  representing  (if  we  judge  the  future 
by  the  past)  the  fairly- to-be-estimated  earnings  of  this  property. 

But  there  is  one  other  element  which  it  seems  to  me  the  committee 
should  consider  in  connection  with  this  matter.  That  is  that  in  a  few 
years  the  first-mortgage  bonds  of  the  company,  which  are  now  carrying 
6  per  cent  interest,  and  the  subsidy  bonds  of  the  Govern  men  t,  which 
mature  from  now  to  the  end  of  the  century,  can  be  extended  at  a  rate 
of  interest  lower  than  that  which  they  now  carry,  and  in  that  way  the 
company  will  be  able  to  make  a  saving,  or  additional  earning,  by  reason 
of  the  diminution  of  fixed  charges. 

The  CHAIRMAN.  At  what  rate  of  interest  do  you  estimate  that  the 
bonds  can  be  extended? 

Mr.  TWEED.  It  is  a  difficult  thing  to  estimate.  I  should  say  they 
certainly  could  be  extended  at  5  per  cent  interest.  Of  course  it  all 
depends  on  the  condition  of  the  money  market  at  the  time,  at  what 
rate  of  interest  the  Government  bonds  are  going,  etc.  There  are  a 
thousand  things  that  affect  the  question — the  financial  situation,  com- 
mercial prosperity,  or,  as  you  may  state  it  briefly,  the  loaning  value  of 
money.  I  should  say  that  we  may  estimate  that  we  can  do  it  at  5  per 
cent.  I  should  certainly  hope  that  we  could  do  it  at  4J  per  cent.  I  can 
not  say  that  my  hopes  extend  lower  than  that. 

Senator  DAVIS.  Your  figures  show  that  it  will  take  close  work  to  pay 
interest  on  the  Government  bonds. 

Mr.  TWEED.  I  think  there  would  be  just  enough  left  to  pay  2  per 
cent  on  the  $60,000,000  of  principal  and  interest  that  we  owe  to  the  Gov- 
ernment. That  is  where  we  come  to.  Judging  the  future  by  the  past, 
there  is  just  enough  net  earnings  to  pay  2  per  cent  on  the  $60,000,000 
of  the  Government  bonds.  But  there  is  to  be  taken  into  account  the 
saving  of  interest  by  the  extension  of  the  company's  bonds.  If  we  have 
to  pay  but  5  per  cent  interest  where  we  now  pay  6  per  cent,  we  shall 
save  $278,000  a  year.  If  we  can  extend  the  bonds  at  4£  per  cent  we 
shall  have  a  saving  of  a  little  over  $400,000  a  year.  But  the  difficulty, 
so  far  as  we  are  concerned,  is  that  it  is  not  an  operation  which  we 
can  make  when  we  want  to,  or  as  if  the  maturity  of  the  bonds  was  far 
oif  and  we  had  the  right  to  select  our  own  time  for  their  extension. 
It  is  an  operation  forced  upon  us  at  a  particular  time. 

Senator  STEWART.  That  is,  at  the  maturity  of  the  bonds'? 

Mr.  TWEED.  Yes;  and  we  have  got  to  do  it  under  the  money  con- 
ditions then  prevailing.  So  that,  after  all  (assuming  that  the  amount 
of  Government  debt  is  $60,000,000),  we  will  pay  2  per  cent  interest  on 
that 5  and  then,  if  I  were  making  a  suggestion  myself,  I  should  say 
that  there  should  be  a  provision  for  the  annual  or  semiannual  reduc- 
tion of  the  principal  of  the  debt  by  the  amount  which  we  shall  save  on 
the  refunding  of  the  first-mortgage  bonds.  Of  course,  as  to  that  saving 
there  is  this  difficulty;  it  will  take  us  two  or  three  years  in  which  to  do 
it.  A  bond  issue  of  $30,000,000  can  not  be  extended  without  cost  to 
the  syndicate,  and  that  is  going  to  involve  a  certain  amount  of  expendi- 
ture in  connection  with  the  operation. 

So  that,  in  a  certain  way,  it  may  be  said  that  this  saving  of  1  or  1£ 
per  cent  is  not  a  saying  beginning  to-day,  but  a  saving  beginning  in  the 
next  century,  and  is  subject,  in  a  certain  way,  to  those  charges  which 
will  be  absolutely  necessary  in  realizing  that  diminution. 

But,  based  upon  the  figures  I  have  referred  to,  it  seems  to  me  that  we 


16  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

coine  practically  to  about  this:  Two  per  cent  on  the  aggregate  amount 
of  the  principal  and  interest  of  the  Government  debt,  arid  then  an 
annual  contribution  to  diminish  the  principal  of  the  new  Government 
bonds  by  reason  of  the  1  or  1£  per  cent  which  we  shall  be  able  to  save  on 
the  first-mortgage  bonds,  according  to  the  prevailing  money  condition. 

Senator  DAVIS.  Do  you  calculate  on  discharging  the  principal  of  the 
new  bonds  at  the  end  of  the  term? 

Mr.  TWEED.  I  have  not  figured  that  out  to  see,  but  I  should  think 
that  we  ought  to  do  it,  or  at  least  to  pay  so  much  of  the  principal  that, 
at  the  maturity  of  the  new  bonds,  it  should  be  seen  that  the  balance 
unpaid  was  so  trifling  as  that  it  would  amount  to  the  same  thing.  As 
the  years  go  by,  the  Central  Pacific  Railroad  Company  will  have  certain 
amounts  of  money  with  which  to  make  these  payments.  As  to  how  it 
shall  seem  wise  to  you  that  this  shall  be  done,  we  must  only  be  certain 
that  whatever  operation  we  set  out  in  may  be  fairly  and  reasonably 
expected  to  be  carried  out  to  its  completion. 

Senator  STEWART.  Have  you  any  fixed  opinion  what  other  payment 
can  be  made  to  the  Government  in  addition  to  the  interest  on  these 
2  per  cent  bonds  ? 

Mr.  TWEED.  I  state  it,  inferentially,  in  a  certain  way.  We  are  look- 
ing at  it  to-day  with  the  uncertainties  of  the  money  question.  Perhaps 
we  can  pay  $250,000  a  year,  or  1  per  cent.  Of  course  we  are  now  in  a 
time  of  financial  difficulty — in  a  time  when  it  is  difficult  to  float  bonds 
at  a  low  rate  of  interest.  If  we  had  to  do  it  to-day  we  could  not,  I  think, 
save  more  than  1  per  cent  on  extending  the  first-mortgage  bonds.  And 
yet  we  have  got  the  advantage  or  the  disadvantage  of  the  course  of 
financial  matters  between  now  and  1899,  and  it  may  be  that  within  that 
time  we  can  extend  those  bonds  at  4£  per  cent.  Of  course,  if  we  were 
going  to  make  the  estimate  for  to-day,  we  would  have  to  make  it  at  5 
per  cent.  That  would  be  all  that  we  could  now  anticipate,  and  that 
would  save  us  just  $278,000  a  year. 

The  CHAIRMAN.  Will  you  file  with  the  committee  the  figures  you 
have  referred  to  ? 

Mr.  TWEED.  Yes. 

[They  are  appended  to  Mr.  Tweed's  statement.] 

Senator  FRYE.  Can  you  give  to  the  committee  an  idea  of  the  addi- 
tional security  which  you  propose  to  give  to  the  Government?  The 
security  which  the  Government  now  holds  is  not  worth  a  cent.  The 
proposition  is  that  there  shall  be  additional  security  given  for  the  car- 
rying out  of  this  contract  which  you  intimate  may  be  made.  Have  you 
given  any  estimate  as  to  the  value  of  that  security? 

Mr.  TWEED.  I  have  not ;  and  for  this  reason :  It  is  easy  to  make 
estimates,  but  no  two  experts  will  agree  upon  them.  I  think  that, 
after  all,  the  way  to  determine  the  value  of  railroad  property  is  by 
what  it  earns.  I  could  give  you  an  estimate  of  the  value  of  this  prop- 
erty, but  I  do  not  think  it  would  advance  you  a  particle;  for,  after  all, 
what  you  have  got  to  look  at  is  what  is  to  come  out  of  this  property. 
The  Government,  of  course,  could  not  sell  the  bonds  for  what  they 
would  be  really  worth  to  the  Government;  it  would  be  so  much  more 
economical  for  the  Government  to  take  the  money  as  it  comes. 

Senator  FRYE.  When  do  the  Government  bonds  become  due? 

Mr.  TWEED.  They  are  maturing  from  now  on  until  1899. 

Senator  FRYE.  These  are  6  per  cent  bonds? 

Mr.  TWEED.  Yes. 

Senator  FRYE.  Of  course  the  Government  could  take  up  those  subsidy 
bonds  by  issuing  new  bonds  at  3  per  cent? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


17 


Mr.  TWEED.  Undoubtedly.  I  liave  taken  the  principal  of  the  subsidy 
bonds  and  have  added  the  interest  on  all  those  bonds  to  June  30, 1896. 

The  CHAIRMAN.  What  do  you  make  the  amount? 

Mr.  TWEED.  The  amount  without  the  application  of  the  sinking-fund 
payments  is  $66,618,000,  and  after  the  application  of  the  sinking-fund 
payments  is  $60,222,000.  I  have  taken  the  principal  of  the  subsidy 
bonds  to  the  Central  Pacific  and  the  Western  Pacific,  $27,855,680,  and 
have  added  to  it  the  interest  to  maturity,  $49,248,924,  making  the  total 
debt  with  interest  to  maturity,  $77,104,604. 

Then  as  the  average  date  of  maturity  of  this  debt  has  been  fixed  by 
the  Interior  Department  as  the  8th  of  December,  1897, 1  have  discounted 
this  $77,000,000  at  2  per  cent  per  annum,  and  brought  it  to  the  1st  of 
July,  1896,  making  an  amount  equal  to  about  $75,000,000.  That  is  to 
say,  $75,000,000  put  at  interest  on  the  1st  of  July,  1896,  would,  at  the 
average  date  of  the  maturity  of  the  bonds,  realize  to  the  Government 
the  whole  aggregate  amount  which  the  Government  will  have  paid  out 
on  the  principal  and  interest  of  the  bonds;  and  1  have  deducted  from 
that  aggregate  amount  the  credits  to  the  bond  and  interest  account, 
which  leaves  the  debt  on  June  30,  1896  (without  the  application  of 
the  sinking-fund  payments),  at  $66,618,000;  or,  deducting  the  amount  of 
the  sinking-fund  payments,  at  $60,222,000.  I  should  not  like  to  guar- 
antee the  accuracy  of  my  figures,  but  the  principle,  I  think,  is  right. 

The  following  are  the  two  tables  presented  by  Mr.  Tweed: 

Central  Pacific  lines  and  properties,  and  existing  liens  thereon. 


Description  of 
Central  Pacific 
lines  and  prop- 
erties. 

Miles 

First- 
mortgage 
bonds  to 
which 
subsidy 
bonds  are 
subordi- 
nate. 

United 
States  sub- 
sidy bonds. 

First- 
mort- 
gage 
West- 
ern Pa- 
cific 
bonds. 

First- 
mortgage 
San  Joa- 
qnin  Val- 
ley bonds. 

First- 
mortgage 
California 
and  Ore- 
gon and 
Central 
Pacific 
successor 
bonds. 

Central 
Pacific 
land- 
grant 
bonds  of 
1870. 

Central  Pa- 
cific 5  per 
cent  bonds 
of  1889. 

Aided  lines: 
Sacramento  to 
5  miles  west 
of  Ogden  
Sacramento  to 
San  Jose  
Nonaided  lines  : 
Oakland    to 
Niles  
Lathrop    to 
Goshen  
Roseville  to 
.Oregon 
boundary  .  .  . 
Locallines, 
terminal 
properties, 
and  real  es- 
tate in  San 
Francisco, 
Oakland, 
and  Alame- 
da,  steam- 
ers, ferry- 
boats, and 
equipment 

737.  50 
123.  14 

24.31 
146.  08 

296.  50 

$25,  883,  000 
1,  970,  000 

*$25,  885,  120 
1  1,970,  560 

$16,  000,  000 

$765,  000 

$6,  080,  000 

$10,  340 

Land  grant, 
estimated  at 
8,  0  0  0,  0  0  0 
acres  

$2,  615,  000 

*  Balance  of  interest  paid  by  United  States  and  unreimbursed ;  to  November  1, 1895,  $33,868,669.31. 
t  Balance  of  interest  paid  by  United  States  and  unreimbursed ;  to  November  1,  1895,  $3,077,685.14. 


18  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Central  Pacific  Railroad  (including  ll'vtslcrn  Pacific}. 

Principal  of  bonds  advanced: 

To  Central  Pacific $25,885,120.00 

To  Western  Pacific 1,970,560.00 

Total $27,855,680.00 

Interest  thereon  to  maturity,  at  6  per  cent  per  annum : 

Account  of  Central  Pacific 45,  786,  454,  67 

Account  of  Western  Pacific 3,  462,  469. 74 


Total 49, 248,  924. 41 


Total  debt,  with  interest  ta  maturity 77, 104,  604. 41 


The  present  worth  of  $77,104,604.41  as  of  July  1, 1896, 
discounting  said  amount  at  2  per  cent  per  annum, 
for  the  period  between  the  average  date  of  maturity 

(December  8, 1897)  and  the  1st  day  of  July,  1896,  is 74,  951,  983. 45 

Less  credits  to  bond  and  interest  account: 

To  December  31,  1895 8, 170,  740. 57 

Estimate  for  six  months  to  June  30, 1896 163,  000. 00 

8,  333,  740. 57 


Debt  as  of  June  30,  1896,  without  application  of 

sinking-fund  payments 66,  618,  242. 88 

Deduct  amount  in  the  sinking-fund  account : 

To  December  31,  1895 6, 259, 127. 15 

Estimate  for  six  months  to  June  30, 1896 137,  000.  00 

6,  396, 127. 15 

Debt  as  of  June  30.  1896,  after  application  of 
sinking  fund '. 60,222,115.73 

STATEMENT  OF  MR.  COLLIS  P.  HUNTINGTON. 

Mr.  C.  P.  HUNTINGDON,  president  of  the  Southern  Pacific  Bailroad 
Company,  said: 

Mr.  CHAIRMAN  AND  GENTLEMEN  OF  THE  COMMITTEE  :  I  desire  to 
say  a  word — not  to  improve  on  what  Mr.  Tweed  has  said.  I  organized 
and  built  the  Central  Pacific,  and  we  have  kept  it  a  live,  going  prop- 
erty. We  have  no  floating  debt.  We  commenced  with  wooden 
bridges,  and  they  are  now  all  steel  and  iron.  We  are  getting  the  road 
nearly  ballasted,  and  there  is  a  good  deal  of  money  that  we  have  been 
paying  and  that  helps  the  question;  so  that  we  are  really  better  off 
than  we  seem.  I  want  to  pay  a  hundred  cents  on  the  dollar  of  our 
debt,  and  to  pay  as  much  as  we  can  at  fixed  times  and  in  fixed  amounts 
until  it  is  all  paid.  I  would  like  to  make  a  statement  hereafter,  show- 
ing that  we  are  a  little  better  off  really  than  we  seem  to  be.  That 
power  to-day  will  be  very  much  more  in  the  future  than  in  the  past. 

Senator  FRYE.  That  will  be  vtry  agreeable  news  to  the  committee. 

Mr.  HuNTiNGrTON.  We  have  no  floating  debt;  everything  is  free,  and 
we  have  done  a  good  many  things. 

The  CHAIRMAN.  You  have  made  the  road  permanent1? 

Mr.  HuNTiNGrTON.  Yes ;  everything  is  permanent,  and  we  are  out  of 
debt,  excepting  this  mortgage,  and  we  have  done  a  good  deal  in  the 
way  of  clearing  off  several  little  mortgages.  When  the  time  comes  I 
wish  to  come  before  you  and  to  take  half  an  hour  of  your  time,  but  not 
in  thrashing  out  old  straw.  I  want  to  tell  you  how  clean  the  matter  is. 
I  do  not  believe  that  any  of  you  think  I  have  stolen;  but  that  is  what 
our  friends,  the  enemy  in  California,  represent.  I  do  want  to  talk  for 
the  builders  of  the  Central  Pacific  road  and  for  its  financial  affairs  from 
the  start  to  the  present  time. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  19 

Senator  FRYE.  They  do  say  that  you  have  paid  a  large  sum  of  money 
to  Mr.  Sutro  to  tempt  him  to  stop  this  threatening'  in  the  papers.  Is 
there  any  truth  in  that? 

Mr.  HUNTINGTON.  I  have  nothing  to  do  with  that.  He  wanted  me 
to  build  a  road  to  his  place.  I  said  I  could  not  do  it.  He  asked  me  to 
lunch,  and  he  said,  "I  want  to  talk  to  you;  I  want  you  to  build  a  road 
to  my  place  from  the  Central  Pacific  road"  (8  miles,  I  believe).  I  said, 
"I  cannot  do  it  now;  I  will  sometime.-'  He  said,  "  I  am  going  to  fight 
you."  I  said,  "  Commence  your  fight  now,  damn  you.  I  have  nothing 
more  to  say."  So  I  got  up  from  the  table,  and  went  away.  In  a  gen- 
eral way  I  have  a  good  many  things  to  say  to  the  committee. 

The  CHAIRMAN.  We  want  to  hear  the  proposition  which  you,  as  pres- 
ident of  the  company,  may  make. 

Mr.  HUNTINGTON.  I  have  got  some  figures  to  present  to  the  com- 
mittee afterwards. 

The  CHAIRMAN.  We  will  have  another  meeting  next  Saturday,  in 
this  room,  and  then  we  will  be  able  to  give  you  all  the  day. 

THE  SIOUX  CITY  AND  PACIFIC  RAILWAY. 
STATEMENT  OF  MR.  DAVID  T.  LITTLER. 

Mr.  DAVID  T.  LITTLER,  of  Springfield,  111.,  counsel  for  the  Chicago 
and  Northwestern  Railway  Company,  presented  the  case  of  the  Sioux 
City  and  Pacific  Eailway.  He  said: 

MR.  CHAIRMAN  AND  GENTLEMEN:  I  am  here  as  counsel  for  the 
Chicago  and  Northwestern  Railway  Company,  but  I  suppose  my  employ-, 
nient  takes  in  the  Sioux  City  and  Pacific  Railway.  If  the  committee 
is  to  sit  again  a  week  from  to-day,  I  would  much  rather  present  the 
matter  then  than  do  it  now.  Will  that  suit  the  committee? 

Senator  FRYE.  For  what  road  do  you  desire  to  speak? 

Mr.  LITTLER.  The  Sioux  City  and  Pacific  Railroad. 

Senator  FRYE.  With  a  debt  of  about  three  or  four  million  dollars  to 
the  Government  1 

Mr.  LITTLER.  Yes. 

Senator  FRYE.  I  am  in  favor  of  taking  anything  for  that  debt  which 
you  wish  to  give. 

Mr.  LITTLER.  This  bill,  gentlemen,  is  so  simple  that  I  hardly  think 
it  necessary  to  take  up  the  time  of  the  committee,  and  if  a  brief  gen- 
eral statement  will  answer  the  purpose  of  the  committee  I  will  make  it 
now. 

Senator  FRYE.  You  may  just  as  well  make  it  now.  The  committee 
will  not  be  bothered  a  great  deal  by  this  matter. 

Mr.  LITTLER.  I  will  not  go  into  every  detail  or  into  figures,  although 
I  have  them  at  hand,  and  am  perfectly  familiar  with  the  history  of  the 
corporation  from  the  first  shovelful  of  dirt  thrown  up  to  the  time  when 
the  United  States  Railway  Commission  made  its  report. 

This  road  belongs  practically  to  the  Chicago  and  Northwestern  Rail- 
way Company,  which  owns  substantially  all  its  stock;  and  while  I  am 
not  prepared  to  give  the  names  of  the  owners  of  the  first-mortgage 
bonds,  1  expect  that  if  inquiry  were  made  it  would  be  found  that  many 
of  those  who  are  stockholders  of  the  Chicago  and  Northwestern  road 
own  the  first-mortgage  bonds  of  the  Sioux  City  and  Pacific.  However, 
for  the  purposes  of  this  bill  it  is  wholly  immaterial  who  owns  them. 

The  CHAIRMAN.  This  Sioux  City  and  Pacific  Railroad  line  is  part  of 
the  line  on  which  the  Chicago  and  Northwestern  gets  into  Sioux  City? 

Mr.  LITTLER.  Yes. 


20  GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS. 

The  CHAIRMAN.  And  part  of  it  is  operated  to  connect  St.  Joseph  and 
St.  Paul! 

Mr.  LITTLER.  Yes.  I  have  a  report  here  containing  a  map  which  will 
show  these  things  perfectly. 

The  CHAIRMAN.  The  part  of  the  road  lying  in  Nebraska  is  a  part  of 
the  Elkhorn  division,  is  it  not? 

Mr.  LITTLER.  I  think  so.  The  line  runs  from  Sioux  City,  Iowa,  to 
California  Junction,  70  miles  in  round  numbers ;  then  it  goes  to  Fremont, 
Nebr.,  far  enough  to  make  101  miles  of  road. 

The  CHAIRMAN.  Not  owning  the  bridge? 

Mr.  LITTLER.  No,  sir;  not  owning  the  bridge.  1  drew  the  bill  which 
is  now  before  the  committee.  I  am  not  very  proud  of  it  5  I  am  willing 
that  the  committee  shall  amend  and  perfect  it  if  it  needs  amendment; 
but  the  general  features  of  the  bill  I  think  are  pretty  good.  The  United 
States  Government  can  only  act  through  officers  and  agents.  My  client 
proposes  (if  this  bill  appointing  three  commissioners  with  absolute 
power  to  settle  and  adjust  the  Government  loan,  subject  only  to  the 
approval  of  the  President  of  the  United  States,  should  become  a  law) 
to  pay  you  the  cash.  The  Government  has  got  to  have  an  agent  to  deal 
with  us.  This  Congress  and  this  committee  have  not  time  to  go  into  a 
dicker  with  my  client  for  the  purpose  of  ascertaining  the  value  of  this 
lien,  and  for  that  reason  we  offer  this  bill.  If  you  can  conceive  of  a 
more  sensible  and  business-like  way  of  disposing  of  it,  we  will  be  glad 
to  accept  your  plan. 

The  CHAIRMAN.  This  bill  provides  for  three  commissioners  to  make 
a  settlement  and  adjustment  of  the  debt? 

Mr.  LITTLER.  Yes. 

The  CHAIRMAN.  And  on  their  verdict  and  judgment  being  approved, 
your  company  proposes  to  pay  the  money? 

Mr.  LITTLER.  That  is  exactly  what  we  propose.  The  question  is  not 
complicated,  as  is  that  of  the  Union  Pacific  or  the  Central  Pacific.  I 
am  sorry  for  those  fellows  who  are  not  able  to  come  up  and  say, u  We  will 
pay  you  the  cash."  But  they  are  not  doing  that.  My  bill  does  not  pro- 
vide for  more  than  three  commissioners,  because  I  do  not  think  it  neces- 
sary to  load  a  cannon  in  order  to  shoot  a  snowbird.  I  think,  however, 
that  there  ought  to  be  one  little  amendment  added  to  this  bill.  My 
experience  is  that  even  three  men  can  not  agree  unanimously  on  any 
proposition  of  law  or  fact. 

That  proposition  will  be  favored  by  an  examination  of  the  report  of 
the  United  States  Pacific  Railway  Commission,  which  had  control  of 
the  entire  bond  account  system  of  the  Pacific  railroads.  It  was  unfor- 
tunately true  that  the  minority  of  that.commissiou  disagreed  with  Mr. 
Anderson  and  myself  in  reference  to  every  question  of  fact,  as  well  as 
to  every  question  of  law,  so  that  the  importance  of  a  small  commission 
can  hardly  be  overestimated.  But  in  order  to  prevent  a  failure  in  this 
legislation,  I  think  it  would  be  well  to  amend  this  bill  and  provide  that 
the  commission,  or  a  majority  of  it,  should  have  power  to  settle  this 
indebtedness,  subject  to  the  approval  of  the  President  of  the  United 
States. 

Senator  DAVIS.  That  is  right. 

Mr.  LITTLER.  I  think  that  is  right. 

Senator  FRYE.  Does  your  bill  provide  for  arbitration  ? 

Mr.  LITTLER.  It  provides  for  the  appointment  of  three  commissioners 
with  absolute  power  to  settle  the  indebtedness,  subject  only  to  the 
approval  of  the  President  of  the  United  States. 

Senator  FRYE.  With  an  agreement  on  your  part  that  the  Chicago  and 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  21 

Northwestern  Railroad  Company  shall  pay  whatever  this  commission 
will  find  due  to  the  Government? 

Mr.  LITTLER.  I  am  not  going  to  make  that  broad  statement.  I  do 
not  know  what  sort  of  a  commission  you.  will  give  us.  But  I  will  say 
right  now  that  we  will  pay  all  the  money  that  the  best  witnesses  in  the 
United  States,  the  most  competent  witnesses,  the  best  engineers,  the 
best  accountants,  the  best  railroad  builders,  the  best  business  men, 
will  say  that  the  Government  lien  is  worth  ;  we  will  do  that.  But  I 
am  not  going  to  tell  this  committee  that  we  will  take  the  chance  on  the 
appointment  of  a  commission,  and  will  let  that  commission  understand 
that  we  are  under  obligation  to  pay  all  that  it  says  the  thing  is  worth. 
We  will  pay  all  that  the  evidence  shows  the  Government  lien  to  be 
worth ;  and  that  is  all  that  Congress  ought  to  ask  at  our  hands.  If 
you  give  us  an  unreasonable  commission,  we  can  not  help  it.  We  will 
tender  in  cash  every  dollar  that  the  Government  lien  is  worth  in  equity. 

Senator  FRYE.  I  should  recommend  Governor  Pattison  as  chairman 
of  the  commission. 

Mr.  LITTLER.  I  give  notice  here,  now,  that  we  would  not  accept  his 
views.  I  think  the  committee  will  agree  with  me  that  the  proposition 
is  a  very  simple  and  proper  mode  of  disposing  of  this  small  matter.  I 
would  like  the  committee,  as  1  say,  to  amend  the  bill  so  as  to  provide 
that  a  majority  of  the  commission  shall  have  power  to  settle  it.  With 
that  amendment  I  think  the  bill  ought  to  pass.  I  do  not  see  how  any 
reasonable  man  can  object  to  it.  I  can  furnish  you  in  great  detail  every 
fact  in  relation  to  the  construction  of  the  road,  and  can  bring  it  down 
to  date,  but  I  do  not  choose  to  encumber  you  with  it,  because  that  will  be 
part  of  the  duty  of  the  commission.  The  question  for  this  committee  is 
whether  the  plan  proposed  is  a  proper  mode  to  pursue  in  order  to  secure 
a  settlement  or  payment  of  this  claim  on  behalf  of  the  Government. 

The  CHAIRMAN.  That  is  probably  true  so  far  as  this  committee  is 
concerned,  but  this  bill  will  be  a  matter  of  debate,  and  the  members  of 
the  committee  should  be  fortified  by  all  the  evidence  that  you  can  sug- 
gest. In  other  words,  we  should  have  an  engineer's  estimate  of  the 
cost  of  the  road,  and  also  of  its  earnings,  so  as  to  be  able  to  show  to 
Congress  what  that  cost  and  those  earnings  have  been,  and  thereby 
enable  Congress  to  judge  of  the  propriety  or  feasibility  of  adopting  the 
settlement  which  you  propose. 

Mr.  LITTLER.  I  can  have  all  these  facts  prepared  and  I  will  do  so. 
And  if  the  furnishing  of  these  will  be  taken  by  the  committee  in  lieu 
of  further  oral  remarks,  I  will  do  it. 

The  CHAIRMAN.  That  is  all  that  the  committee  desires. 

Mr.  LITTLER.  I  will  furnish  a  statement  showing  the  cost  of  the  con- 
struction of  this  road,  the  amount  of  its  first  mortgage,  and  the  amount 
of  its  second  mortgage;  and  I  will  show  that  the  road  has  never  paid  a 
cent  of  interest;  that  it  was  of  no  account  in  the  first  place;  that  it  was 
unwise  legislation  ever  to  have  authorized  the  subsidy  by  the  Govern- 
ment. There  was  less  excuse  for  the  legislation  creating  this  indebted- 
ness than  for  any  legislation  which  ever  passed  the  Congress  of  the 
United  States. 

The  CHAIRMAN.  I  differ  from  you  in  that.  The  policy  of  the  Union 
Pacific  Railroad  Company  was  to  build  a  great  main  line,  which  was 
done.  Then  from  the  hundredth  parallel  there  was  to  have  been  a  road 
built  by  the  northeast  to  Minnesota  and  by  the  southwest  to  Kansas. 
The  confidence  of  the  Government  was  abused  in  the  fact  that  this  road 
was  built  in  a  southeasterly  direction  instead  of  a  southwesterly  direc- 
tion. 


22  GOVERNMENT   DEBT    OF   THE    PACIFIC   RAILROADS. 

Mr.  LITTLER.  I  am  talking  about  the  road  as  it  was  built,  .and  I  am 
condemning  the  policy  of  the  Government  in  so  framing  a  law  as  to 
allow  a  road  to  be  built  in  the  wrong  direction. 

The  CHAIRMAN.  Mr.  Lincoln's  confidence  was  abused  in  recognizing 
the  company  which  built  that  road. 

Mr.  LITTLER.  I  am  sorry  I  drew  out  the  chairman  on  that  point,  for 
it  is  not  an  important  issue.  I  am  not  here  to  criticise  the  conduct  of 
the  gentlemen  who  built  that  road.  The  practical  question  is,  how  much 
the  Government  can  get  out  of  its  loan  to  the  company. 

The  CHAIRMAN.  I  agree  with  you. 

Mr.  LITTLER.  Well,  1  will  furnish  the  committee  with  a  statement  of 
the  present  financial  condition  of  the  road,  showing  what  it  cost  in  the 
first  place,  and  probably  showing  what  the  Government  lien  is  worth 
now.  We  are  going  to  take  testimony,  we  are  going  to  subpoena  the 
ablest  engineers  and  railroad  builders,  and  we  are  going  to  pay  every 
dollar  which  that  class  of  witnesses  will  say  the  property  is  worth,  and 
nothing  more. 

The  CHAIRMAN.  That  is  simply  a  matter  of  evidence. 

Mr.  LITTLER.  Yes,  sir;  it  is  a  matter  of  evidence  which  this  com- 
mittee has  nothing  to  do  with. 

The  CHAIRMAN.  Therefore  we  want  this  statement  in  regard  to  the 
earnings  of  the  road,  etc. 

Mr.  LITTLER.  I  will  give  all  that  to  you,  and  yet  I  do  not  know 
what  the  committee  will  Avant  it  for. 

The  CHAIRMAN.  The  committee  knows  what  it  needs  it  for. 

Adjourned  until  Saturday  February  8,  at  10  a.  in. 


WASHINGTON,  D.  C.,  February  8,  1896. 
The  committee  met  at  10  o'clock  a.  m. 

Present,  Senators  Gear  (chairman),  Stewart,  Wolcott,  Frye,  Brice, 
and  Morgan. 

PACIFIC. 


STATEMENT  OF  MR.  WINSLOW  S.  PIERCE—  Continued. 

Senator  WOLCOTT.  I  have  been  reading  in  your  testimony  this  plan 
of  reorganization  which,  I  take  it,  you  are  familiar  with  as  counsel. 

Mr.  PIERCE.  Yes. 

Senator  WOLCOTT.  Do  you  take  the  position  that  the  Government 
lien  is  one  that  can  be  foreclosed  ? 

Mr.  PIERCE.  Yes,  sir. 

Senator  W  OLCOTT.  Your  position  is  that  the  Government  must  either 
come  to  the  front  and  do  something,  or  else  that  the  owners  of  the  first- 
mortgage  bonds  may  foreclose  the  Government  out  of  its  interest  in  the 
property  ? 

Mr.  PIERCE.  Yes;  may  foreclose  the  Government  just  as  it  might 
foreclose  individuals. 

Senator  WOLCOTT.  The  Government  has  received  the  ordinary  notice 
which  any  other  creditors  would  have  received? 

Mr.  PIERCE.  Yes;  a  monition  to  the  Government  notifying  it  of  the 
pendency  of  the  proceedings  that  have  been  taken. 

Senator  WOLCOTT.  Do  you  think  that  the  Government  is  in  the  posi- 
tion of  any  other  creditor,  and  that  if  the  Government  fails  to  protect 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  23 

the  liens  in  advance  of  its  own  the  holders  of  the  first-mortgage  bonds 
may  foreclose  upon  the  Government  interest? 

Mr.  PIERCE.  Yes,  sir. 

Senator  WOLCOTT.  So,  therefore,  this  offer  that  you  are  making  to 
the  Government  on  behalf  of  the  reorganization  committee  is  not  because 
the  presence  of  the  Government  is  essential  to  your  reorganization  plan, 
but  is  so  that  the  Government  may  be  advised  and  warned  that  if  it 
desires  to  protect  its  lien  it  must  come  forward  and  do  something? 

Mr.  PIERCE.  Not  exactly  so.  In  the  statement  addressed  by  the 
chairman  of  the  reorganization  committee  to  the  chairman  of  this  com- 
mittee the  purpose  of  the  reorganization  committee  in  that  respect  was 
stated.  It  was  stated  there,  if  I  recollect  aright,  that  while  the  reor- 
ganization committee's  view  was  that  the  Government  could  be  fore- 
closed, and  that  no  outstanding  right  of  redemption  would  be  leftopen, 
the  committee  would  consider  it  better  to  agree  with  the  Government 
on  some  just  and  equitable  solution  of  the  matter — some  fair  adjustment 
of  the  Government's  claim  against  the  property. 

Senator  WOLCOTT.  Just  as  I  understand.  Not  because  it  was  essen- 
tial, but  because  it  was  equitable. 

Mr.  PIERCE.  Equitable,  and  also  essential  from  a  business  standpoint. 

Senator  WOLCOTT.  From  a  point  of  view  of  citizenship? 

Mr.  PIERCE.  No;  I  say  from  a  business  standpoint — that  it  is,  above 
all  odds,  a  better  plan  that  there  should  be  an  adjustment  of  the  debt, 
so  that  no  question  of  this  character  should  be  raised  and  pressed  to 
an  extremity. 

Senator  W'OLCOTT.  It  would  not  be  essential  to  bring  in  the  Govern- 
ment, if  it  were  not  necessary. 

Mr.  PIERCE.  It  would  be  far  the  better  course  to  agree  with  the 
Government  about  questions  of  this  kind  than  to  have  a  question  of 
this  kind  litigated.  Undoubtedly  the  position  that  we  take  upon  that 
point  is  not  shared  universally.  I  believe  it  to  be  the  opinion  of  most 
lawyers  (certainly  of  those  with  wrhom  I  have  discussed  the  question) 
that  we  are  correct  about  this  5  but  it  is  obviously  inexpedient  to  leave 
a  question  of  that  kind  open. 

Senator  WOLCOTT.  You  think  that  the  opinion  of  the  lawyers  is  not 
shared  by  the  laymen  1 

Mr.  PIERCE.  I  do  not  know  as  to  that. 

Senator  WOLCOTT.  But  though  the  opinion  of  lawyers  is  that  the 
Government  can  be  effectively  foreclosed  you  thought  it  a  matter  of  pru- 
dence that  the  Government  should  be  given  an  opportunity  to  come  in? 

Mr.  PIERCE.  Yes,  sir. 

Senator  STEWART.  Do  you  construe  the  statutes  creating  the  lien  as 
sufficient  authority  for  a  citizen  to  sue  the  Government  and  to  bring  the 
Government  into  court  ? 

Mr.  PIERCE.  Our  view  upon  that  point  is,  that  when  the  Govern- 
ment subordinated  its  lien  to  that  of  the  first-mortgage  bondholders,  it 
did  so  deliberately  and  in  terms  effective  for  that  purpose.  The  Gov- 
ernment then  consented  to  all  remedies  that  were  necessary  for  the  pro- 
tection of  this  prior  lien ;  and  an  indispensable  element  of  such  priority 
would  be  the  right  of  foreclosure.  And  unless  there  was  a  concealed 
purpose  on  the  part  of  the  Government,  that  right  of  effective  fore- 
closure was  undoubtedly  iinpliedly  granted. 

Senator  WOLCOTT.  In  view  of  that,  this  reorganization  committee 
has  been  organized,  and  I  notice  that  you  state  on  page  6  of  your  testi- 
mony "that  the  interest  on  the  first-mortgage  bonds'7  (I  am  quoting 
from  your  testimony)  "  is  taken  care  of  by  a  syndicate  which  finances 


24  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

the  reorganization.  The  Government  interest  it  is  proposed  to  take 
care  of  by  the  issue  of  securities."  When  you  speak  of  the  syndicate 
financing  the  reorganization  what  do  you  mean  ? 

Mr.  PIERCE.  That  the  syndicate  shall  take  care  of  the  financial 
requirements  under  the  plan — such,  for  instance,  as  the  accrued  interest 
of  the  first -mortgage  bonds.  The  casli  requirements  of  the  plan — 

Senator  WOLCOTT.  I  will  come  to  that  later.  How  is  this  syndicate 
to  be  compensated  for  its  financiering? 

Mr.  PIERCE.  The  reorganization  agreement  and  plan  provides  for  an 
assessment  of  the  capital  stock  and  an  application  of  the  assessment 
to  meet  the  financial  requirements  of  the  plan.  That  is  one  method. 
Another  method  is,  that  as  the  court  shall  direct  the  payment  of  coupons 
those  that  have  been  taked  up  by  the  syndicate,  or  on  account  of  the 
syndicate,  will  be,  of  course,  paid. 

Senator  WOLCOTT.  I  see  that  your  financial  plan  contemplates  grant- 
ing to  the  reorganization  committee  $6,000,000  of  preferred  stock.  Is 
that  a  bonus? 

Mr.  PIERCE.  Compensating  the  syndicate  and  bankers.  The  plan 
proposes  giving  to  the  syndicate  and  bankers  that  amount  of  preferred 
stock  as  compensation  for  their  services. 

Senator  WOLCOTT.  Are  there  bankers  as  well  as  a  syndicate  in  this 
matter? 

Mr.  PIERCE.  Yes. 

Senator  WOLCOTT.  What  do  the  bankers  do  that  the  syndicate  does 
not  do? 

Mr.  PIERCE.  The  bankers  furnish  the  money  provided  through  the 
syndicate. 

Senator  WOLCOTT.  Do  they  control  the  syndicate? 

Mr.  PIERCE.  Yes;  in  the  sense  of  managing  its  financial  operations. 

Senator  WOLCOTT.  These  bankers  are? 

Mr.  PIERCE.  Kuhn,  Loeb  &  Co. 

Senator  WOLCOTT.  Then  the  bankers  control  the  syndicate.  In 
what  sense? 

Mr.  PIERCE.  I  should  rather  use  the  term  "  manage."  It  is  in  the 
sense  of  organizing  the  syndicate  and  controlling  its  financial  opera- 
tions, making  calls  for  assessments  of  money  that  may  be  necessary 
from  time  to  time  to  meet  its  financial  obligations  under  the  plan. 

Senator  WOLCOTT.  Do  the  bankers  direct  the  operations  of  tbe  reor- 
ganization committee? 

Mr.  PIERCE.  No,  sir. 

Senator  WOLCOTT.  They  simply  direct  the  operations  of  the  syndi- 
cate? 

Mr.  PIERCE.  Yes;  and,  in  a  measure,  the  reorganization  committee 
directs  their  action  and  that  of  the  syndicate.  There  are  some  provi- 
sions of  the  plan  relating  to  the  matter  which  I  do  not  remember. 

Senator  WOLCOTT.  What  are  Kuhn,  Loeb  &  Co.  to  receive  besides 
the  six  millions  of  preferred  stock  for  their  services? 

Mr.  PIERCE.  The  provisions  relating  to  that  matter  are  found  on 
pages  17  and  18  of  the  plan  of  reorganization. 

Senator  WOLCOTT.  Having  the  book  before  you,  tell  me  how  Messrs. 
Kuhn,  Loeb  &  Co.  are  to  get  this  six  millions  of  preferred  stock. 

Mr.  PIERCE.  They  do  not  get  six  millions  of  preferred  stock. 

Senator  WOLCOTT.  What  do  they  get? 

Mr.  PIERCE.  The  provision  is — 

Six  million  dollars  of  preferred  stock  are  to  be  turned  over  as  compensation  to  the 
syndicate,  of  which  the  bankers  are  to  retain  one  million  as  their  own  compensation. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  25 

Senator  WOLCOTT.  Is  that  all  that  they  get? 

Mr.  PIERCE.  That  is  all  that  they  get  as  bankers.  The  provision  is 
that  the  expenses  of  the  reorganization  are  to  be  borne  through  the 
issue  of  securities  that  have  only  a  contingent  interest  in  the  profits  of 
the  railroad. 

Senator  WOLCOTT.  You  mean  the  securities  that  coine  ahead  of  the 
stock? 

Mr.  PIERCE.  The  preferred  stock — having  only  a  contingent  interest 
in  the  earnings. 

Senator  WOLCOTT.  There  is  also  a  provision  for  seven  millions  of 
preferred  stock  to  meet  any  extraordinary  calls  prior  to  the  reorganiza- 
tion. Is  that  also  in  the  control  of  the  syndicate  and  bankers? 

Mr.  PIERCE.  Prior  to  the  reorganization? 

Senator  WOLCOTT.  So  I  understand.  "  Reserved  for  equitable  organi- 
zation and  for  corporate  uses,  $7,000,000."  That  amount,  must  be  appli- 
cable to  the  syndicate. 

Mr.  PIERCE.  No,  sir. 

Senator  WOLCOTT.  What  is  meant  by  u  reorganization  and  corpo- 
rate uses  ? " 

Mr.  PIERCE.  Reorganization  uses  are  those  which  may  arise  unpro- 
vided for  and  of  an  extraordinary  character,  all  of  which  can  not  be 
foreseen  in  the  preparation  of  a  plan  of  this  kind.  " Corporate  uses" 
would  be  those  which  would  be  proper  to  the  corporation  hereafter — 
such,  for  instance,  as  the  issue  of  securities  in  extension  of  the  property, 
if  that  should  be  deemed  a  wise  course  to  pursue.  There  is  a  multitude 
of  other  uses  which  will  occur  to  you,  being  familiar  with  corporate 
matters,  but  all  of  which  should  be  provided  for  in  any  security  to  be 
issued  by  such  a  provision  as  would  not  admit  of  the  use  of  the  security 
for  other  than  legitimate  corporate  purposes. 

Senator  WOLCOTT.  It  appears  that  this  reorganization  plan  contem- 
plates the  issue  of  one  hundred  millions  of  4  per  cent  bonds,  seventy- 
five  millions  of  4  per  cent  preferred  stock,  and  six  millions  of  common 
stock. 

Mr.  PIERCE.  Yes. 

Senator  WOLCOTT.  Of  these  4  per  cent  bonds  you  are  to  give  the 
Government  the  principal  of  its  debt,  $33,000,000? 

Mr.  PIERCE.  I  should  rather  state  it  in  this  way.  In  the  first  place, 
the  amount  of  securities  you  mention  are  the  authorized  amounts, 
including  some  in  excess  of  present  requirements.  The  provision  as 
respects  the  Government  is  that  a  certain  amount  of  securities  shall  be 
reserved  as  a  resource  for  the  purpose  of  making  some  adjustment  of 
the  debt.  We  do  not  know,  and  have  not  assumed,  that  the  Govern- 
ment is  willing  to  receive  the  principal  of  its  debt  in  bonds  and  the 
interest  paid  by  the  Government  in  preferred  stock,  but  these  funds 
are  reserved  as  a  margin  of  resources. 

Senator  WOLCOTT.  I  understood  you  to  say  that  that  was  the  feature 
of  your  plan. 

Mr.  PIERCE.  If  I  did  say  it,  it  should  be  with  that  explanation. 

Senator  WOLCOTT.  I  read  from  page  10  of  your  testimony: 

Senator  FRYE.  Your  proposition  simply  covers  the  principal  of  the  Government 
debt. 

Mr.  PIERCE,  The  plan  indicates  the  distribution  of  new  fifty-year  4  per  cent  gold 
bonds  and  then  the  distribution  of  stock  to  the  common  stockholders.  For  the  pur- 
pose of  making  this  plan  a  financial  success,  and  of  meeting  the  interest  on  the  first- 
mortgage  bonds  which  reqiiires  to  be  paid,  the  stockholders  are  called  upon  to  pay 
an  assessment  of  $15  a  share,  and  a  majority  of  them  have  already  consented  to  do 
so.  For  that  we  issue  preferred  stock.  The  feature  of  the  plan  pertaining  to  the 


26  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Government  debt  is  this :  Bonds  reserved  for  settlement  of  the  debt  to  the  United 
States  and  for  the  extraordinary  requirements  $:$r>,7f>5,000  and  $20,864,000  of  pre- 
ferred stock.  Or,  say,  in  round  numbers,  an  amount  of  4  per  cent  bonds  o(|ii;i]  to  t  In- 
principal  of  the  Government  debt  and  an  amount  of  preferred  stock  equal  to  the 
interest  of  the  Government  debt. 

Is  that  what  you  stated? 

Mr.  PIERCE.  Yes;  I  have  no  doubt  I  stated  that,  because  it  is  not 
inconsistent  with  the  facts. 

Senator  WOLCOTT.  Is  not  that  your  plan? 

Mr.  PIERCE.  Our  plan  is  to  reserve,  of  the  securities  to  be  issued, 
$35,755,280  of  the  first-mortgage  bonds  and  $20,804,000  of  preferred 
stock  as  a  fund  or  resource  applicable  to  the  settlement  of  the  Govern- 
ment debt.  You  will  find  in  that  very  presentation  of  the  matter  from 
which  you  are  reading  that  I  proposed  to  the  committee  a  settlement 
of  the  debt,  which  would  be  wholly  inconsistent  with  the  construction 
you  have  placed  upon  that  language.  That  proposition  is  (involving 
some  slight  modification  of  the  plan)  that  the  principal  of  the  Govern- 
ment debt  shall  be  included  in  a  first  mortgage  at  3  per  cent;  then  that 
the  bonds  issued  to  the  Government  shall  rank  in  all  other  respects 
with  the  4  per  cent  bonds  issued  and  that  the  interest  on  the  Govern- 
ment debt  shall  be  considered  a  new  principal  and  shall  be  paid  off 
from  year  to  year  in  fifty  years,  at  2  per  cent  a  year,  without  interest. 

Senator  WOLCOTT.  You  say : 

The  feature  of  the  plan  pertaining  to  the  Government  debt  is  this:  Bonds  reserved 
for  settlement  of  the  debt  to  the  United  States  and  for  extraordinary  requirements, 
$35,755,000,  and  $20,864,000  of  preferred  stock.  Or,  say,  in  round  numbers,  an  amount 
of  4  per  cent  bonds  equal  to  the  principal  of  the  Government  debt  and  an  amount 
of  preferred  stock  equal  to  the  interest  on  the  Government  debt.  These  arereserved 
as  a  fund  by  which  we  hope  to  be  able  to  settle  with  the  Government. 

Mr.  PIERCE.  Precisely  so — as  a  fund  from  which,  or  through  which, 
the  Government  debt  can  be  settled.  Perhaps  I  should  use  the  word 
^resource"  instead  of  "fund." 

Senator  WOLCOTT.  Then  you  propose  to  settle  the  Government  debt 
on  the  basis  of  4  per  cent  bonds  for  principal  and  preferred  stock  for 
the  interest  paid  by  the  Government. 

Mr.  PIERCE.  No;  we  propose  to  settle  with  the  Government  by  the 
use  of  those  securities,  and  by  the  use  of  other  resources,  if  need  be. 
Those  securities  are  to  be  set  aside,  primarily,  for  the  purpose  of  secur- 
ing a  resource  to  settle  with  the  Government.  If  the  Government  shall 
receive  4  per  cent  bonds  for  the  principal  of  its  debt  and  preferred  stock 
for  the  interest  we  will  settle  the  matter  in  that  way. 

Senator  WOLCOTT.  You  spoke  two  or  three  times  in  your  testimony 
last  Saturday  of  the  Government  debt  being  underwritten.  You  say  on 
page  11  of  your  testimony : 

If  the  bonds  are  to  be  underwritten  they  will  have  to  be  underwritten  at  the  price 
which  the  Government  would  be  willing  to  sell  them  for. 

Then  you  say  that — 

the  scheme  contemplates  the  issue  to  the  Government  of  the  bonds  themselves  or  of 
the  proceeds  of  the  bonds. 

Mr.  PIERCE.  The  scheme  admits  of  either  of  those  plans. 

Senator  WOLCOTT.  I  suppose  that  you  have  some  digested  notion  in 
this  plan.  Do  you  desire  the  Government  to  take  the  bonds  or  the 
proceeds  of  the  bonds? 

Mr.  PIERCE.  We  desire  to  meet  any  proposition  of  the  Government 
or  to  suggest  any  proposition  which,  after  investigation,  we  believe  will 
meet  the  approval  of  the  Government,  within  the  limits  of  the  financial 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  27 

possibilities  of  the  property  based  upon  this  plan.  In  other  words,  we 
have  made  no  sort  of  a  hard  and  fast  rule. 

Senator  WOLCOTT.  Have  you  made  any  sort  of  a  soft  and  slow  rule? 
Have  you  made  any  plan  of  settlement  that  you  wish  the  committee  to 
consider  as  your  plan  of  settlement"?  If  so,  please  tell  us  what  it  is. 

Mr.  PIERCE.  In  the  first  place,  we  would  issue  to  the  Govern]] lent 
4  per  cent  bonds  for  the  amount  of  the  principal  of  its  debt,  and  pre- 
ferred stock  for  the  amount  of  the  interest  on  its  debt.  That  is  one 
method  of  settlement  with  which  we  wonld  be  content,  if  it  be  satisfac- 
tory to  the  Government.  A  second  method  would  be  the  issue  of  3  per 
cent  bonds  to  the  Government,  embraced  in  a  first  mortgage,  and  the 
issue  of  a  second  mortgage,  not  to  bear  interest,  but  to  be  paid  off  at 
the  rate  of  2  per  cent  a  year  for  the  interest  on  the  debt. 

The  CHAIRMAN.  That  would  be  equal  to  a  duebill  for  the  annual  2 
per  cent,  payable  every  year,  without  interest. 

Mr.  PIERCE.  Yes,  sir;  or  we  would  be  willing  to  pay  a  lump  sum  of 
money  equal  to  the  value  of  the  lien,  as  ascertained  by  those  who  are 
competent  to  judge  of  its  actual  cash  value,  as  a  fair  proposition. 

Senator  WOLCOTT.  Have  you  made  any  proposition  of  that  sort  to 
the  committee'? 

Mr.  PIERCE.  No,  sir  5  not  a  definite  one.  I  did  say  to  the  House 
committee  that  we  would  probably  be  able  to  pay  50  per  cent  on  the 
total  amount  due  to  the  Government. 

Senator  WOLCOTT.  That  would  be  less  than  the  principal  of  the 
debt. 

Mr.  PIERCE.  That  would  be  somewhat  less  than  the  principal  of  the 
debt.  We  would  also  be  willing  to  settle  on  such  a  reasonable  sum  as 
might  be  determined  by  a  commission  appointed  under  a  law  of  Con- 
gress, that  should  be  charged  with  the  duty  of  ascertaining  the  fair 
cash  value  of  the  Government's  claim  and  lien.  I  make  this  suggestion 
in  order  to  meet  the  suggestion  which  you  have  made,  that  we  have 
presented  nothing  definite.  I  ought  to  go  on  and  add  this.  This  seems 
to  be  a  very  definite  proposition,  and  would  afford  a  good  deal  of  lati- 
tude for  fair  dealing  between  the  Government  and  the  reorganization 
committee. 

Senator  WOLCOTT.  The  scheme  here  does  not  contemplate  the  pay- 
ment of  any  cash  sum,  does  it? 

Mr.  PIERCE.  No;  but  you  will  observe  that  all  of  the  suggestions 
which  I  have  made  are  consistent  with  the  suggestions  in  the  plan  of 
reorganization — that  there  is  to  be  a  balance  reserved  for  the  purpose 
of  settlement;  that  is,  a  resource  through  which  we  may  be  able  to 
meet  the  Government  on  any  of  the  settlements  proposed. 

Senator  WOLCOTT.  I  have  not  been  making  the  slightest  objection 
as  to  inconsistency. 

Mr.  PIERCE.  I  stated  to  the  House  committee  what  I  want  to  state 
here,  that  we  felt  that,  in  this  matter,  while  we  could  afford  to  lay  down 
in  our  plan  of  reorganizatoin  such  provisions  for  the  distribution  of  new 
securities  to  meet  such  of  the  outstanding  obligations  of  the  company 
as  were  peremptory  and  fixed,  that  course  was  not  respectful  toward 
the  Government.  Therefore  we  have  undertaken  to  leave  this  latitude 
for  dealing  with  the  Government. 

Senator  WOLCOTT.  I  read  from  your  testimony  on  pages  12  and  13: 

The  additional  properties  put  into  the  mortgage  will  make  these  bonds  salable  at 
some  reasonable  price.  Wo  do  not  expect  to  sell  them  at  par,  nor  do  we  expect  to  be 
able  to  sell  any  large  amount  of  them  at  a  price  beyond  90  or  80. 

So  that,  if  the  Government  should  settle  at  your  suggestion  by  tak- 


28  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

ing  4  per  cent  bonds  for  the  principal  of  its  debt,  you  would  give  it 
a  security,  which  would  be  worth  only  80  cents  on  the  dollar  in  the 
market. 

Mr.  PIERCE.  You  have  quoted  my  statement  correctly.  I  had  not 
supposed  that  I  had  put  so  large  a  value  as  that  on  a  large  block  of 
bonds. 

Senator  WOLCOTT.  Would  you  now  put  the  value  of  such  a  large 
block  of  bonds  at  70  per  cent? 

Mr.  PIERCE.  1  do  not  know  that  I  would  be  justified  in  putting  any 
value  upon  them.  That  is  a  matter  of  surmise  and  speculation.  A 
very  large  block  of  4  per  cent  bonds,  even  fairly  secured,  would  not  sell 
at  the  rate  that  a  few  bonds  on  the  market  would  sell  at. 

Senator  WOLCOTT.  But  you  would  not  call  this  a  speculative  bond? 

Mr.  PIERCE.  No. 

Senator  WOLCOTT.  How  do  you  deal  with  the  sinking  fund  in  your 
reorganization  plant 

Mr.  PIERCE.  We  have  treated  the  sinking  fund  as  being  an  amount 
applicable  to  the  reduction  of  the  debt;  and,  in  our  statement  of  the 
debt,  we  have  made  a  statement  for  the  deduction  of  the  sinking  fund, 
The  statement  of  debt,  however,  I  believe,  is  excessive  as  made  in  our 
plan  of  reorganization.  More  recent  figures  would  put  principal  and 
interest  of  the  Government  debt,  after  deduction  of  the  sinking  fund, 
at  about  $52,000,000. 

Senator  WOLCOTT.  Is  there  any  ulterior  agreement  respecting  this 
reorganization  whereby  the  Missouri  Pacific  Railway  Company  is  to 
have  the  Kansas  Pacific  branch,  and  the  Chicago  and  Northwestern 
Railroad  Company  is  to  have  the  Union  Pacific  after  the  reorganization  ? 

Mr.  PIERCE.  None  whatever. 

Senator  WrOLCOTT.  Mr.  Gould  is  represented  on  your  reorganization 
committee,  and  the  Yanderbilt  interest  is  also  represented  on  it. 

Mr.  PIERCE.  I  do  not  know  how  far  that  statement  is  correct. 
Mr.  Depew,  president  of  the  New  York  Central,  and  Mr.  Hughitt,  of 
the  Chicago  and  Northwestern  Company,  are  on  the  reorganization 
committee;  but  I  should  not  have  said  that  either  the  Yauderbilt  or 
the  Gould  interests  particularly  were  directly  represented  upon  the 
committee,  although  there  are  on  the  committee  men  who  are  friends, 
and,  in  some  instances  associates,  of  both  those  interests. 

Senator  WOLCOTT.  As  to  the  earnings  of  this  Union  Pacific  Railroad 
Company.  If  you  continued  to  pay  interest  on  your  first-mortgage 
bonds  you  could  not  very  easily  foreclose  the  Government,  could  you? 
I  mean  if  you  paid  interest  and  principal  on  the  first-mortgage  bonds 
as  they  matured. 

Mr.  PIERCE.  No,  sir. 

Senator  WOLCOTT.  If  the  road,  out  of  its  earnings,  continued  to  pay 
interest  on  the  first-mortgage  bonds,  and  the  principal  as  it  matured, 
you  could  not  foreclose  the  Government  interest,  could  you? 

Mr.  PIERCE.  No,  sir. 

Senator  WOLCOTT.  You  have  $1,600,000  interest  unpaid  on  those 
first-mortgage  bonds  ? 

Mr.  PIERCE.  On  the  Union  division  an  amount  of  interest  is  in  default, 
something  like  $1,600,000. 

Senator  WOLCOTT.  You  are  not  familiar  with  the  earnings  of  the 
road  under  the  receivers,  I  suppose? 

Mr.  PIERCE.  Somewhat. 

Senator  WOLCOTT.  Do  you  not  know,  as  a  matter  of  fact,  that  if  the 
receivers  had  not  diverted  the  earnings  of  the  road  to  other  purposes, 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  29 

such  as  paying  off'  the  floating  debt,  the  road  would  have  been  able, 
out  of  its  own  earnings,  even  in  bad  years,  to  pay  the  interest  on  its 
first-mortgage  bonds"? 

Mr.  PIERCE.  I  can  not  say  that  I  know  that.  I  represent  before  Con- 
gress, exclusively  the  holders  of  the  securities  of  the  property.  I  should 
add  to  my  answer,  in  relation  to  the  amount  of  interest  in  default  on 
the  first-mortgage  bonds,  that  there  is  also  an  amount  of  principal  in 
default, 

Senator  WOLCOTT.     I  read  from  your  testimony  on  page  10 : 

Senator  DAVIS.  The  receivers  do  not  object  to  this  plan,  do  they? 

Mr.  PIKRCE.  No;  I  think  not.  I  think  that,  on  the  contrary,  they  are  more  favor- 
able to  it  than  is  generally  supposed.  It  is  generally  supposed  that  it  is  not  one  of 
their  functions  to  hasten  reorganization.  But  I  do  not  think  they  \vould  be  actuated 
by  that  idea. 

Do  you  speak  authoritatively  for  the  receivers'?  Is  there  a  suppo- 
sition that  the  receivers  are  opposed  to  this  reorganization"? 

Mr.  PIERCE.  I  suppose  that  what  I  had  in  mind  at  that  time  was  the 
suggestion  which  I  heard  some  time  ago — I  think  in  the  House  com- 
mittee; perhaps  a  laughing  suggestion — that  receivers,  as  a  rule,  were 
not  eager  to  bring  about  reorganization.  It  was  rather  in  reference  to 
that  thought  that  1  made  the  suggestion  that  in  this  case  I  felt  quite 
confident  that  the  receivers  would  be  very  glad  to  have  a  reorganiza- 
tion of  the  property.  4 

Senator  WOLCOTT.  Differently  from  other  receivers? 

Mr.  PIERCE.  I  do  not  know  that  1  would  say  that.  That  criticism 
upon  receivers  was  not  mine. 

Senator  WOLCOTT.  You  think  that  receivers  generally  would  be  in 
favor  of  reorganization  of  the  property  under  them? 

Mr.  PIERCE.  I  have  not  qualified  myself  as  an  expert  on  that  point. 

Senator  WOLCOTT.  Certainly  you  spoke  as  if  receivers  were  not  gen- 
erally favorable  to  new  schemes. 

Mr.  PIERCE.  I  have  explained  how  that  thought  arose  in  my  mind. 
My  own  idea  about  it  is  this:  That  while  I  have  been  connected  with  a 
number  of  reorganizations,  1  never  had  any  experience  of  obstacles 
being  interposed  by  receivers.  As  a  rule  they  have  been  honest  men — 
men  whose  attention  was  directed  to  the  best  interests  of  the  property 
intrusted  to  their  care,  and  therefore  I  never  found  them  opposed  to 
reorganization. 

Senator  WOLCOTT.  What  reorganizations  have  you  been  connected 
with"? 

Mr.  PIERCE.  The  St.  Louis  and  Southwestern  organization,  the  Mis- 
souri, Kansas  and  Texas  Company,  and  the  National  and  Great  North- 
ern, and  perhaps  others. 

Senator  WOLCOTT.  So  you  really  are  an  expert  in  reorganization; 
and,  in  your  experience,  you  have  not  found  receivers  anxious  to  delay 
reorganization? 

Mr.  PIERCE.  I  did  not  mean  to  draw  upon  myself  such  a  compliment. 

Senator  MORGAN.  How  many  Government  directors  are  there  in  the 
Union  Pacific  Kailroad? 

Mr.  PIERCE.  Five,  I  believe. 

Senator  MORGAN.  They  derive  their  powers  entirely  from  Congress? 

Mr.  PIERCE.  The  corporate  powers  of  the  company  are  derived 
partly  from  Congressional  legislation  and  partly  from  State  legislation. 

Senator  MORGAN.  The  organization  under  which  these  Government 
directors  act  derives  its  powers  from  the  United  States  statutes? 

Mr.  PIERCE,  The  Union  Pacific  Kailroad  Company  was  created  under 


30  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

an  act  of  Congress  exclusively.  I  do  not  know  of  any  powers  that  it 
derives  from  State  legislation.  The  Kansas  Paciiic  Railway  Company 
was  originally  created  by  Territorial  legislation  as  the  Leavemvortli, 
Pawnee  and  Western  Eailroad  Company  and  derived  its  powers  from 
the  State. 

Senator  MORGAN.  I  have  not  had  an  opportunity  of  reading  your 
plan  of  reorganization.  Does  it  contemplate  a  new  charter  from  the 
United  States  Government1? 

Mr.  PIERCE.  There  is  no  provision  in  the  plan  of  reorganization  for 
that.  It  should  have  a  new  charter  from  the  Government. 

Senator  MORGAN.  Still,  that  is  not  a  part  of  the  plan  of  reorganiza- 
tion ? 

Mr.  PIERCE.  It  is  not  so  provided. 

Senator  MORGAN.  Do  you  know  any  authority  which  the  Government 
of  the  United  States  has  given,  in  any  of  its  statutes,  for  being  sued 
or  for  having  a  mortgage  forclosed? 

Mr.  PIERCE.  The  authority  to  which  1  referred  a  moment  ago  in 
answer  to  Senator  Stewart's  question.  I  never  have  had,  personally, 
any  doubt  that  consent  to  sue  is  involved  in  the  act  of  Congress  subordi- 
nating the  Government  lien. 

Senator  MORGAN.  In  what  court  has  this  Government  ever  consented 
to  be  sued  ? 

Mr.  PIERCE*  You  mean  in  what  specific  court? 

Senator  MORGAN.  Yes. 

Mr.  PIERCE.  There  is  no  specific  consent  by  the  Government  to  be 
sued  in  any  particular  court,  but  the  implication  would  be  (if  there  was 
consent  under  the  terms  of  the  act)  that  it  would  be  in  any  court  of  com- 
petent jurisdiction — I  believe  the  court  where  the  property  is  situated. 

Senator  MORGAN.  In  any  district  or  Federal  court  ? 

Mr.  PIERCE.  In  the  Federal  court  of  the  district  in  which  the  prop- 
erty is  situated. 

Senator  MORGAN.  If  you  were  going  to  prepare  a  bill  to  foreclose  the 
Government  of  the  United  States  in  the  case  of  the  Union  Pacific,  what 
jurisdiction  would  you  select? 

Mr.  PIERCE.  I  should  select  the  United  States  circuit  court  in  the 
district  of  Nebraska,  inasmuch  as  the  corporation  had  its  home  there — 
the  original  corporation  was  commenced  there;  and  I  think  that  view 
has  had  additional  force  by  reason  of  the  decision  in  the  Northern 
Pacific  case. 

Senator  MORGAN.  If  you  could  not  find  jurisdiction  in  that  court 
you  would  not  be  able  to  find  it  anywhere,  would  you? 

Mr.  PIERCE.  By  reason  of  the  fact  that  the  road  runs  through  several 
districts  ? 

Senator  MORGAN.  Or  by  reason  of  any  fact? 

Mr.  PIERCE.  I  would  find  it  in  any  district  through  which  the  road 
ran  with  the  lien  upon  its  property.  In  this  case  the  main  bill  should 
be  filed  in  Nebraska,  and  ancillary  bills  in  other  districts. 

Senator  MORGAN.  What  are  the  ancillary  bills  to  which  you  refer? 

Mr.  PIERCE.  Bills  in  aid  of  an  original  bill  filed  in  the  court  of  pri- 
mary jurisdiction. 

Senator  MORGAN.  The  ancillary  bill  being  filed  in  a  separate  court? 

Mr.  PIERCE.  Yes,  filed  in  a  separate  court. 

Senator  MORGAN.  Do  you  know  of  any  statute  which  authorizes 
any  proceedings  like  that? 

Mr.  PIERCE.  I  do  not  know  any  such  statute,  and  I  do  not  suppose 
that  any  statute  is  necessary  for  that  purpose. 


GOVERNMENT   DEBT   OF    THE    PACIFIC   RAILROADS.  31 

Senator  MORGAN.  What  would  be  necessary? 

Mr.  PIERCE.  That,  I  should  think,  would  be  a  rule  of  practice  and 
proceeding  which  the  Supreme  Court  of  the  United  States  would  have 
power  to  announce,  and  announce  effectively. 

Senator  MORGAN.  Has  any  such  power  been  announced  by  the 
Supreme  Court  of  the  United  States? 

Mr.  PIERCE.  The  Supreme  Court  has  recognized  the  right  of  comity 
in  courts  where  the  property  runs  through  several  districts. 

Senator  MORGAN.  Is  there  any  such  doctrine  of  comity  in  the  United. 
States  law? 

Mr.  PIERCE.  I  think  so. 

Senator  MORGAN.  Can  you  point  to  a  statute  which  refers  to  comity 
as  comprising  part  of  the  jurisdiction  of  any  court  or  a  union  between 
the  jurisdictions  of  any  two  courts? 

Mr.  PIERCE.  No;  but  I  think  that  without  difficulty  I  can  cite  you 
a  number  of  decisions  which  recognize  the  rule  of  comity. 

Senator  MORGAN.  Will  you  refer  the  committee  to  them? 

Mr.  PIERCE.  I  can  state  now  where  a  very  excellent  discussion  of 
the  subject  is  had.  It  is  in  the  case  of  the  trustees  of  the  Short  Line 
first-mortgage  bonds  of  the  Utah  Northern  Company  before  Judge 
Gilbert,  in  the  ninth  circuit.  I  should  be  very  glad  to  send  you  a 
memorandum  of  that  case. 

Senator  MORGAN.  Is  there  any  other  case? 

Mr.  PIERCE.  Judge  Ballinger  concurred  with  Judge  Gilbert.  There 
are  a  number  of  cases  cited  in  that  decision,  all  having  the  same  drift. 

Senator  MORGAN.  Can  you  cite  any  decision  from  the  Supreme  Court 
of  the  United  States? 

Mr.  PIERCE,  The  case  of  Miller  against  Dowd  is  an  authority  on  the 
general  proposition  of  the  right  of  dealing  with  a  property  that  runs 
through  several  districts.  Then,  in  the  case  of  Cox  against  the  Texas 
Pacific,  I  remember  that  the  primary  jurisdiction  in  the  district  court 
of  Louisiana  was  recognized.  I  think,  however,  that  the  decision  of 
Judge  Gilbert,  covering  a  reference  to  a  number  of  other  cases,  will 
meet  your  inquiry. 

Senator  MORGAN.  In  whose  name  would  you  bring  the  suit  for  the 
securities  which  you  represent? 

Mr.  PIERCE.  In  the  name  of  the  trustees  of  the  mortgage.  The 
cases  are  already  pending. 

Senator  MORGAN.  That  is  a  private  suit  by  private  individuals 
against  the  United  States. 

Mr.  PIERCE.  It  is  a  private  suit  in  the  sense  that  the  individuals  are 
private  parties.  They  are,  however,  trustees  of  the  mortgage,  and  are 
the  proper  parties  to  institute  suit  for  the  foreclosure  of  the  mortgage. 

Senator  MORGAN.  But  not  against  the  United  States. 

Mr.  PIERCE.  It  is  for  the  foreclosure  of  the  lien ;  and  of  course,  for 
a  decree  under  which  the  effective  sale  of  the  property  free  from  all 
equities  or  redemption  in  the  junior  bondholders  (in  this  case  the  United 
States)  shall  take  place.  In  that  suit  the  United  States  is  named. 

Senator  MORGAN.  Was  there  an  appearance  on  the  part  of  the  United 
States? 

Mr.  PIERCE.  There  was  indirectly  an  appearance  in  the  original 
Ames  bill. 

Senator  MORGAN.  Do  you  claim  that  that  court  has  jurisdiction,  in 
virtue  of  that  suit,  of  the  lien  of  the  United  States? 

Mr.  PIERCE.  I  think  that  that  court  has  jurisdiction  of  the  property; 
and  that  involves  the  right  to  decree  a  sale  of  the  property  free  from  all 


32  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

equities  of  redemption  in  the  United  States  or  in  any  other  junior 
bondholder. 

Senator  MORGAN.  Without  reference  to  the  fact  that  the  United 
States  Government  never  consented  to  be  sued  ? 

Mr.  PIERCE.  I  think  that  is  so,  Avithout  reference  to  the  question  of 
consent  at  all.  The  United  States  has  dealt  with  this  property  as  a 
lien  holder.  The  theory  of  foreclosure,  it  seems  to  me,  is  to  give  all 
parties  notice  who  may  have  a  right  of  redemption,  and  if,  within  the 
time,  they  fail  to  resort  to  their  right  of  redemption,  the  legal  effect  of 
that  is  for  estoppel.  That  doctrine  would  apply  equally  to  the  United 
States  as  to  other  parties.  In  addition  to  that,  I  have  already  said  that 
it  seems  to  me  that  the  right  of  foreclosure  is  necessarily  given  by  the 
terms  of  the  act,  and  by  the  practical  construction  given  to  that  act  by 
subsequent  acts  of  Congress. 

Senator  MORGAN.  Then  you  have  all  the  power  you  need  to  foreclose 
the  mortgage  of  the  United  States? 

Mr.  PIERCE.  I  have  always  thought  so. 

Senator  MORGAN.  You  do  not  need  any  assistance  of  legislation  by 
Congress  to  reach  the  legitimate  conclusion  of  foreclosing  this  lien? 

Mr.  PIERCE.  Legislation  of  Congress  directly  on  that  point  would, 
110  doubt,  put  an  end  to  any  possible  debate  about  it,  but  yet  I  do  not 
think  it  necessary. 

Senator  MORGAN.  You  think  that  you  have  got  all  the  authority  you 
need  ? 

Mr.  PIERCE.  Yes. 

Senator  MORGAN.  Do  these  bills  undertake  to  sell  the  franchise? 

Mr.  PIERCE.  They  undertake  to  sell  the  franchise.  They  undertake 
to  sell  all  the  mortgage  rights. 

Senator  MORGAN.  What,  then,  would  become  of  the  Government 
directors  after  the  foreclosure?  You  would  not  sell  the  directors  also? 

Mr.  PIERCE.  No;  I  hardly  think  we  would  attempt  that. 

Senator  MORGAN.  What  would  become  of  the  right  of  the  United 
States  to  keep  and  maintain  five  directors  in  that  corporation  after  you 
had  sold  the  corporation  out? 

Mr.  PIERCE.  I  should  not  assume  that  any  such  right  existed. 

Senator  MORGAN.  You  would  assume  that  you  had  extinguished  that 
right? 

Mr.  PIERCE.  That  right  would  be  extinguished. 

Senator  MORGAN.  Then  you  would  repeal  the  act  of  Congress  which 
requires  directors  to  be  appointed  in  that  corporation,  would  you? 

Mr.  PIERCE.  No;  I  would  carry  out  the  act  of  Congress. 

Senator  MORGAN.  In  what  way? 

Mr.  PIERCE.  By  the  enforcement  of  the  first  lien.  I  do  not  think 
that  that  would  involve  the  carrying  out  of  all  those  particular  rela- 
tions existing  between  the  Government  and  the  old  company. 

Senator  MORGAN.  You  think,  then,  that  you  would  have  extinguished 
all  the  rights  of  the  United  States  in  maintaining  directors  for  this 
company? 

Mr.  PIERCE.  I  should  say  that,  when  the  property  was  sold  under 
the  first  lien  created  by  act  of  Congress,  the  property  would  be  sold, 
free  and  clear  of  any  obligations  of  that  character. 

Senator  MORGAN.  What  would  become  of  the  right  of  the  United 
States  to  the  transportation  of  its  soldiers,  munitions  of  war,  mails,  and 
such  things  as  that?  Would  that  right  be  sold  also? 

Mr.  PIERCE.  They  are  to  be  transported  " at  reasonable  rates,"  I 
believe  that  is  the  provision  of  the  act. 


GOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS.  33 

Senator  MORGAN.  Well,  whatever  the  provision  is. 

Mr.  PIERCE.  The  duty  of  transportation  would  be  a  common-law 
obligation  of  the  company. 

Senator  MORGAN.  I  am  asking  you  what  you  propose  to  do?  What 
becomes  of  the  right  of  the  United  States  to  the  transportation  of  its 
mails,  soldiers,  officers,  and  munitions  of  war  after  you  have  sold  out 
the  road  and  it  has  gone  into  private  hands? 

Mr.  PIERCE.  I  have  no  doubt  that  the  right  of  the  United  States  to 
the  use  of  the  road  would  subsist  after  the  sale.  I  have  no  doubt  that 
that  is  the  right  of  the  United  States  with  reference  to  any  road.  Of 
course,  it  need  not  become  a  practical  questioD,  because  the  transfer 
provides  for  that,  and  the  legislation  of  Congress  can  reserve  that 
right  to  the  United  States. 

Senator  MORGAN.  I  do  not  understand  that  you  need  any  legislation 
of  Congress.  You  say  that  you  have  got  all  the  power  yow  want. 
Therefore  you  can  sell  this  lien  of  the  United  States,  foreclose  it,  wipe 
it  out,  with  all  its  incidents,  and  leave  the  company  which  may  buy 
the  road,  or  the  men  who  may  buy  it,  to  deal  with  the  United  States 
hereafter  on  the  principle  of  the  common  law. 

Mr.  PIERCE.  I  think  I  have  explained,  that  legislation  in  this  matter 
is  desirable  from  the  standpoint  of  the  Government  and  from  the 
standpoint  of  the  security  holders. 

Senator  MORGAN.  Would  you  not  say  that  it  was  indispensable? 

Mr.  PIERCE.  No,  I  can  not  reach  that  conclusion.  I  can  not  reach 
the  conclusion  that  there  is  anything  in  the  exercise  of  this  remedy 
given  by  Congress  that  is  inconsistent  with  the  remedy  itself— that  is, 
that  would  block  the  entire  purpose  of  the  legislation.  I  do  not  believe 
that  the  enforcement  of  the  remedy  would  raise  such  inconsistencies  as 
would  make  the  act  giving  the  prior  lien  valueless. 

Senator  MORGAN.  Suppose  that  all  the  members  of  the  syndicate 
purchasing  the  property  are  aliens — living  in  Germany — would  that 
alter  the  feature  of  the  case  in  your  estimation,  or  would  it  leave  us,  in 
a  national  sense,  exposed  to  a  very  great  difficulty? 

Mr.  PIERCE.  I  have  no  idea  that  that  would  be  the  case. 

Senator  MORGAN.  Could  it  not  be  the  case?  Could  not  a  German  syn- 
dicate buy  the  property  as  well  as  an  American  syndicate? 

Mr.  PIERCE.  It  is  not  contemplated  that  the  syndicate  shall  buy  the 
property. 

Senator  MORGAN.  Could  not  anybody  buy  it? 

Mr.  PIERCE.  The  reorganization  committee  would  probably  be  the 
purchasers;  or  a  committee  designated  by  it,  as  purchasing  trustees. 

Senator  MORGAN.  You  have  got  a  bill  to  make  sale  of  this  property 
and  all  its  belongings,  including  its  franchises,  and  of  course  the  pur- 
chasers can  get  what  you  sell.  Now,  if  the  purchasers  should  be  aliens 
resident  in  Germany,  would  they  acquire  all  the  rights  which  you 
mention  under  this  decree? 

Mr.  PIERCE.  No  purchaser  of  the  property  would  be  qualified  who  is 
disqualified  under  our  laws  from  purchasing  such  property  in  this 
country.  If  he  were  qualified  under  our  laws  to  make  the  purchase,  he 
would  have  all  the  rights  that  were  sold. 

Senator  MORGAN.  Is  not  an  alien  creditor  qualified  under  our  laws 
to  buy  property  here?  Is  not  that  a  universal  right? 

Mr.  PIERCE.  I  am  not  able  to  say  whether  that  is  a  right  which 
applies  in  this  country  or  not. 

Senator  MORGAN.  Have  you  ever  heard  of  a  case  where  an  alien  was 
refused  the  right  to  purchase  property  in  this  country? 
PB 3 


34  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  PIERCE.  I  am  very  clear  that  the  general  rule  is  that  he  may, 
and  that  he  may  be  able  to  hold  it  afterwards.  In  some  States  he  is 
not  able  to,  but  as  a  rule  he  can  enforce  his  lien  and  sell  out  the 
property. 

Senator  MORGAN.  If  it  became  an  escheat  he  could  not  hold  it,  I 
suppose! 

Mr.  PIERCE.  I  am  quite  certain  that  in  some  of  the  States  there  is 
legislation  that  prevents  an  alien  from  holding  property. 

Senator  MORGAN.  What  becomes  of  the  property  in  that  case? 

Mr.  PIERCE.  I  have  not  followed  that  out.  I  am  not  able  to  give  an 
opinion  on  that  subject. 

Senator  MORGAN.  The  point  I  was  trying  to  arrive  at  was  whether 
or  not,  in  the  existing  state  of  the  law,  any  provision  in  the  statutes  of 
the  United  States  enables  you  to  proceed  to  a  final  decree  of  foreclosure 
and  sale  of  this  property  independent  of  any  further  action  on  the  part 
of  the  United  States  Government,  or  whether  Congiess  must  not  come 
to  your  assistance  if  you  expect  to  do  anything  toward  realizing  your 
money  by  a  sale  ot  the  property. 

Mr.  PIERCE.  Our  view  is  that  we  can  foreclose  the  first-mortgage 
loan;  but  as  to  Congress  coming  to  our  assistance,  another  and  a  prac- 
tical question  arises.  The  Government  of  the  United  States  is  the 
holder  of  a  very  large  interest  in  this  property.  There  is  absolutely  no 
occasion  for  foreclosure.  The  matter  should  be  one  of  agreement.  We 
know  how  difficult  it  is  to  deal  with  a  large  body  like  the  Government. 
But  this  is  a  practical  question,  and  there  ought  to  be  no  difficulty  in 
reaching  a  business  conclusion  of  the  matter.  Therefore  the  necessity 
and  propriety  of  legislation. 

Senator  MORGAN.  But  you  do  not  think  it  is  a  part  of  the  pressure 
you  can  use,  to  bring  that  about,  that  you  have  got  already  all  the 
rights  you  require? 

Mr.  PIERCE.  You  mean,  to  put  a  pressure  upon  Congress? 

Senator  MORGAN.  Yes. 

Mr.  PIERCE.  I  have  not  referred  to  the  matter  in  any  such  light  as 
that,  and  I  should  be  sorry  to  have  the  committee  think  that  we  were 
taking  any  such  position. 

Senator  WOLCOTT.  Do  you  require  legislation  ? 

Mr.  PIERCE.  1  think  we  do.  We  require  Congress  to  designate  the 
terms  on  which  it  will  settle  this  debt,  and  we  should  ask  legislation 
as  to  the  charter. 

Senator  WOLCOTT.  But  you  have  not  done  so  up  to  this  time. 

Mr.  PIERCE.  No;  but  when  we  prepare  a  bill  we  will  prepare  it  with 
such  provisions  as  we  think  will  best  carry  out  the  reorganization  and 
the  adjustment  which  must  be  made  with  the  Government. 

Senator  FRYE.  As  a  matter  of  fact,  no  bill  has  yet  been  presented  to 
Congress  embodying  your  proposition  ? 

Mr.  PIERCE.  No,  sir. 

The  CHAIRMAN.  As  a  matter  of  fast  you  have  made  no  direct 
proposition? 

Mr.  PIERCE.  None,  except  what  we  suggested  last  Saturday. 

The  CHAIRMAN.  You  stated  that  in  your  scheme  so  much  was  set 
aside  of  bonds  and  stock  for  adjustment  with  the  Government.  You 
do  not  specify,  and  you  have  not  specified,  any  given  amount  of  bonds 
or  stock,  or  any  proposition  except  that  general  statement. 

Mr.  PIERCE.  Except  that  I  have  suggested  that  the  amount  of  the 
principal  of  the  Government  debt  should  be  embraced  in  a  new  3  per 
cent  mortgage  and  that  a  second  mortgage  should  be  given  for  the 
interest  at  2  per  cent  a  year  without  interest. 


GOVERNMENT    DEIiT    OF    THE    PACIFIC    RAILROADS.  35 

The  CHAIRMAN.  What  do  you  make  that  amount? 

Mr.  PIERCE.  About  $52,000,000— $33,000,000  for  the  principal  of  the 
debt  and  the  balance  for  the  interest. 

Senator  WOLCOTT.  That  would  leave  the  hundred  millions  of  4  per 
cent  bonds  ahead  of  it. 

Mr.  PIERCE.  It  would  leave  an  authority  for  a  mortgage  of  a  hun- 
dred millions,  but  not  so  large  an  amount  would  be  issued. 

Senator  STEWART.  If  I  understand  you,  it  will  be  necessary,  in  order 
to  reach  your  remedy,  for  you  to  foreclose,  and  you  think  that  the  right 
to  foreclose  is  implied  in  the  statute — is  that  itf 

Mr.  PIERCE.  I  think  that  the  right  to  foreclose  is  implied  in  the 
statute. 

Senator  STEWART.  Take  any  other  contract.  The  fact  that  a  con- 
tract is  made  with  an  individual,  and  that  the  Government  enters  into 
an  obligation,  would  not  imply  the  right  to  enforce  that  contract  in  the 
courts. 

Mr.  PIERCE.  Not  to  the  same  extent  as  in  this  case.  Here  the  atten- 
tion of  the  Government  was  invited  to  a  particular  transaction,  and 
parties  were  invited,  on  the  faith  of  a  first  mortgage,  to  advance  very 
large  sums  of  money,  running  up  to  $33,000,000,  for  the  purpose  of  the 
construction  of  the  road.  Now,  unless  we  are  to  impute  to  the  Gov- 
ernment a  studied  purpose  to  conceal,  and  unless  we  are  to  impute  tp 
it  bad  faith,  the  purpose  of  the  Government  was  (and  that  purpose 
would  be  effectively  carried  out  by  the  courts)  to  give  an  enforceable 
first-mortgage  lien. 

Senator  STEWART.  Does  not  the  enforcement  of  all  contracts  upon 
the  Government  rest  entirely  upon  the  supposed  good  faith  of  the  Gov- 
ermeut?  The  fact  that  the  contract  is  made  does  not  imply  that  there 
is  any  remedy  in  Congress  to  enforce  it.  In  fact,  there  is  none.  In  all 
ordinary  contracts  with  the  Government  you  have  to  rely  upon  the 
Government  to  carry  them  out  unless  the  Government  with  its  own 
consent  comes  into  court. 

Mr.  PIERCE.  That  would  be  so  ordinarily,  but  this  particular  trans- 
action is  outside  of  the  contemplation  of  that  rule.  *The  act  of  1887 
refers  to  the  first  mortgage  as  an  enforceable  lien.  It  speaks  of  a  time 
when  the  first  lien  may  be  enforced  aud  it  makes  provisions  for  the 
action  of  the  Attorney-General  and  of  the  Secretary  of  the  Treasury  in 
the  event  that  the  first  lien  shall  become  enforceable. 

Mr.  Pierce  asked  the  committee  whether  it  desired  to  put  any  further 
questions  to  him. 

Senator  FRYE.  I  think  that  Mr.  Pierce  is  fairly  entitled  to  a  certifi- 
cate entitling  him  to  practice  in  the  Supreme  Court  of  the  United  States. 

Mr.  PIERCE.  Then  I  am  dismissed  with  that  benediction. 

STATEMENT  OF  MR.  E.  ELLERY  ANDERSON. 

Mr.  E.  ELLERY  ANDERSON,  one  of  the  Government  directors  of  the 
Union  Pacific  Railroad  Company,  said: 

I  have  attended,  Mr.  Chairman,  in  answer  to  your  invitation,  with  an 
expectation  more  of  answering  any  questions  that  may  be  put  than  of 
presenting  any  views  of  my  own. 

Senator  WOLCOTT.  You  are  one  of  the  Government  directors  of  the 
Union  Pacific  Eailroad,  as  well  as  one  of  the  receivers? 

Mr.  ANDERSON.  Yes. 

Senator  WOLCOTT.  You  laid  before  the  Secretary  of  the  Interior  the 
suggestions  of  the  board  of  Government  directors  as  to  the  treatment 


36  GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

to  be  accorded  to  tbe  Union  and  Central  Pacific  railroads  in  connection 
with  their  Government  debt? 

Mr.  ANDERSON.  The  Government  directors  filed  their  report.  I  have 
here  a  copy  of  it. 

Senator  WOLCOTT.  In  that  report  you  made  a  recommendation  as  to 
the  method  of  treatment  of  those  roads? 

Mr.  ANDERSON.  I  believe  we  did. 

Senator  WOLCOTT.  That  recommendation  contemplated  that  the 
Government  should  find  a  way  of  paying  the  first-mortgage  bonds  and 
the  interest  upon  them,  and  should  then  foreclose  and  let  the  high- 
est bidder  take  the  property,  the  Government  fixing  a  minimum  as  an 
upset  price? 

Mr.  ANDERSON.  That  was  substantially  what  we  recommended, 
except  that  our  recommendation  contemplated  the  foreclosure  of  both 
the  liens  of  the  Union  and  Central  Pacific  at  the  same  time. 

Senator  WOLCOTT.  Yes;  that  there  should  be  a  foreclosure  of  both 
liens  at  once.  Do  you  still  favor  that  method  ? 

Mr.  ANDERSON.  I  favor  reaching  an  adjustment  at  a  fixed  price,  if 
possible.  If  the  parties  can  not  come  to  an  agreement,  it  is  my  opinion 
that  the  largest  return  the  Government  can  obtain  is  by  a  foreclosure 
of  both  properties,  and  an  offer  to  the  investors  of  the  United  States  of 
a  complete  railroad  from  the  Missouri  Eiver  to  the  Pacific  Ocean. 

Senator  FRYE.  But  the  Central  Pacific  is  not  in  default  at  all,  is  it? 

Mr.  ANDERSON.  As  to  the  Central  Pacific,  I  understand  that  the 
currency  bonds,  in  a  large  amount,  have  become  due.  Whether  the 
application  of  the  sinking  fund  has  been  actually  made  or  not,  I  am 
not  informed.  The  sinking  fund  is  reported  so  as  to  prevent  a  default 
in  the  public  debt  statement  of  the  1st  of  February  as  not  being  then 
applied,  or  as  being  intact.  If  that  is  so,  the  Central  Pacific  must  be 
in  default. 

Senator  WOLCOTT.  Is  it  your  opinion  that  such  a  consolidation  of 
proceedings  and  sale  of  both  properties  would  bring  to  the  Govern- 
ment the  principal  and  interest  of  its  debt? 

Mr.  ANDERSON.  It  is  not. 

Senator  WOLOOTT.  Do  you  think  it  would  bring  less  than  the  prin- 
cipal and  interest  of  the  debt? 

Mr.  ANDERSON.  I  know  it  will. 

Senator  WOLCOTT.  Explain  what  you  mean  by  saying  you  know  it 
will. 

Mr.  ANDERSON.  I  have  been  connected  with  the  Union  Pacific  Kail- 
road  Company  very  intimately  for  several  years,  and  I  am  very  familiar 
with  its  earning  powers,  its  physical  characteristics,  and  its  advantages 
for  business;  and  it  is  my  judgment  that  the  sale  of  both  the  Union  and 
Central  Pacific  roads  will  not  bring  a  sum  sufficient  to  pay  all  prior 
liens  upon  the  property,  and  also  to  pay  the  principal  and  interest  due 
to  the  Government  of  the  United  States. 

Senator  WOLCOTT.  Have  you  the  same  technical  and  special  knowl- 
edge of  the  Central  Pacific  and  its  prospects? 

Mr.  ANDERSON.  I  have  not. 

Senator  WOLCOTT.  So,  when  you  say  you  "know"  that  the  sale  of 
these  properties  would  not  pay  the  Government  debt,  you  mean  that 
you  know  it  of  the  Union  Pacific,  but  not  of  the  Central  Pacific? 

Mr.  ANDERSON.  No;  I  do  not. 

Senator  WOLCOTT.  What  do  you  mean? 

Mr.  ANDERSON.  My  knowledge  of  the  Central  Pacific,  while  not  as 
accurate  as  my  knowledge  of  the  Union  Pacific,  is  still  sufficiently  defi- 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  37 

nite  to  enable  me  to  make  the  statement  that  I  make.  The  Senator 
will  remember  that  in  1887  I  was  one  of  the  commission  appointed  to 
examine  into  the  condition  of  all  the  bond-aided  Pacific  roads,  and  at 
that  time  I  became  extremely  familiar  with  the  condition  of  all  of  them. 
I  do  not  know  the  Central  Pacific  nearly  as  well  as  I  do  the  Union 
Pacific. 

Senator  WOLCOTT.  You  heard  Mr.  Pierce's  testimony  to-day? 

Mr.  ANDERSON.  Yes. 

Senator  WOLCOTT.  Did  you  hear  the  several  plans  that  he  suggested 
tentatively  ? 

Mr.  ANDERSON.  I  know  what  he  said  about  an  allotment  or  reserva- 
tion of  bonds  and  stock,  and  about  the  proposition  for  a  lump  sum  of 
money,  and  about  an  allotment  of  3  per  cent  bonds  as  a  part  issue  of  a 
general  mortgage,  together  with  a  second  mortgage  to  run  without 
interest  and  to  be  applied  to  the  payment  of  the  interest  due  on  the 
Government  debt. 

Senator  WOLCOTT.  Are  you  favorable  to  that  scheme  of  reorganiza- 
tion? 

Mr.  ANDERSON.  I  am  favorable  to  an  adjustment.  As  a  receiver,  I 
do  not  conceive  it  to  be  a  part  of  my  functions  to  advocate  earnestly 
particular  schemes  until  I  shall  have  fully  matured  my  own  views  and 
ascertained  the  views  of  the  Government. 

Senator  WOLCOTT.  Speaking  as  receiver,  and  as  one  familiar  with 
the  property,  have  you  an  opinion  as  to  Mr.  Pierce's  schemes,  and  as  to 
whether  it  would  be  wise  for  the  Government  to  embark  on  any  one  of. 
them? 

Mr.  ANDERSON.  I  have  a  general  idea  as  to  what  the  Government 
can  get  out  of  the  Union  Pacific. 

Senator  WOLCOTT.  Can  you  apply  that  language  to  Mr.  Pierce's  pro- 
posal and  give  us  the  information  that  we  ought  to  have  as  to  what 
plan,  if  any,  the  Government  should  accept? 

Mr.  ANDERSON.  The  Government  holds  on  the  Union  Pacific  a  lien 
representing  a  certain  amount  of  principal  advanced  and  a  certain 
amount  of  interest  paid  and  not  reimbursed.  The  amount  of  these 
two  sums  approximates  $53,000,000  after  deducting  about  $15,000,000 
now  in  the  sinking  fund  under  the  Thurman  Act.  My  opinion  is  that 
the  sole  question  involved,  in  considering  the  suggestions  of  the 
reorganization  plan,  is  to  determine  fairly  what  the  lien  is  worth.  I 
do  not  regard  the  rights  of  the  Government  against  stockholders  or 
trustees,  who  are  claimed  to  have  misapplied  funds  of  the  Union 
Pacific,  or  to  have  violated  their  duties,  as  entering  at  all  into  this  com- 
putation; not  because  I  do  not  think  that  persons  ought  to  be  held 
responsible  for  wrongs  done,  but  because  it  is  not  a  tangible  asset  that 
can  be  dealt  with. 

Senator  MORGAN.  You  do  not  think  that  anything  would  come  of  it 
in  the  way  of  money? 

Mr.  ANDERSON.  I  do  not.  Too  many  years  have  passed  and  the 
claims  have  grown  too  old  and  too  weak.  Regarding,  then,  the  property 
of  the  Union  Pacific  itself  as  the  natural  source  from  which  reimburse- 
ments may  be  expected,  there  are  two  things  to  be  determined  in  order 
to  reach  a  conclusion  as  to  what  is  a  fair  value  of  the  Government 
assets.  They  are,  first,  the  available  value  of  the  property,  and,  second, 
the  amount  that  must  be  deducted  or  taken  out  before  the  Government 
can  realize  anything  at  all.  The  answer  to  the  question  as  to  the  value 
of  the  Union  Pacific  property  is  not  an  easy  one.  That  value  is  affected 
by  a  great  many  considerations  which  bear  upon  its  earning  powers, 


38  GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

those  considerations  being  the  tendency  of  freight  and  passenger  rates 
to  decrease  and  fall  all  the  time  (which  has  been  a  persistent  factor  for 
many  years  past),  the  extreme  competition  of  other  railroads  serving 
parts  of  the  same  community,  and  many  other  circumstances,  such  as 
the  decreased  salable  value  of  things  that  are  produced  in  the  West; 
all  of  which  considerations  militate  against  the  earning  powers  of  the 
railroad. 

Senator  WOLCOTT.  Have  you  any  objection  to  stating  what  these 
militating  forces  are? 

Mr.  ANDERSON.  I  have  stated  three  of  them,  the  decreasing  rates, 
the  competition  of  other  roads 

Senator  MORGAN.  What  other  roads? 

Mr.  ANDERSON.  There  are  to-day  eight  or  ten  transcontinental  lines, 
whereas  twenty  years  ago  there  was  but  one.  These  are  competing 
roads — the  Southern  Pacific,  the  Burlington,  the  Santa  Fe,  the  South- 
ern Pacific,  the  Missouri  Pacific,  the  Texas  Pacific,  and  others — all  of 
these  railroads  being  factors  to  divide  the  business;  and  therefore  it  is 
harder  for  the  railroad  which  formerly  used  to  make  large  profits  to 
maintain  its  position  as  an  earning  carrier  of  freight  and  passengers, 
and  harder  for  it  to  earn  the  same  amount  than  when  the  competition 
was  less. 

Senator  MORGAN.  Does  the  Southern  Pacific  Railroad  hold  any  excep- 
tional connection  with  this  subject? 

Mr.  ANDERSON.  The  Southern  Pacific,  by  its  connection  with  the 
.Atlantic  Seaboard,  drains  a  very  large  amount  of  business  through  its 
southern  connections,  which,  if  the  Central  Pacific  were  united  to  the 
Union  Pacific,  would  undoubtedly  serve  to  increase  the  earning  powers 
of  the  Union  Pacific.  What  I  was  saying  was  in  reference  to  ascer- 
taining the  fair  value  of  this  property,  looking  at  it  in  several  ways. 
The  Union  Pacific  embraces  about  1,900  or  2,000  miles  of  road.  Esti- 
mating the  value  of  that  road  at  $25,000  a  mile,  it  would  give  fifty 
millions  as  the  value  of  the  railroad,  equipment,  and  rolling  stock. 

The  CHAIRMAN.  Do  you  include  terminals  in  that? 

Mr.  ANDERSON.  Ko,  sir.  To  which  there  should  be  added,  perhaps, 
fifteen  or  twenty  millions  to  represent  not  only  terminal  facilities  but 
the  land  ownership — not  embraced  in  the  land  grant,  but  railroad 
ownership  at  Council  Bluffs,  Omaha,  Kansas  City,  Denver,  and  Chey- 
enne, which,  in  addition  to  the  ordinary  facilities  of  terminal  points, 
embrace  very  valuable  shop  plants,  fully  equipped  and  representing  a 
a  very  large  amount  of  money.  So  in  this  way  you  may  reach  an 
approximate  value  of  $70,000,000  for  this  Union  Pacific  property. 
Another  way  to  look  at  it  would  be  based  on  the  estimated  value  of 
those  very  securities  which  Mr.  Pierce  proposes  to  issue.  He  talked  of 
an  issue  of  ninety  millions  at  present.  I  limit  myself  to  the  amount 
issued,  because  I  assume  that  the  bonds  that  are  not  issued  at  present 
would  be  issued  for  value  and  would  therefore  increase  the  valuation. 
So,  to  reach  the  valuation  based  upon  the  bonds  and  stock,  if  you  take 
the  ninety  millions  issued  and  predicate  a  market  value  of  75  percent 
for  these  4  per  cent  bonds  you  would  have  about  $G7,000,000. 

Senator  STEWART.  Estimating  them  as  gold  bonds. 

Mr.  ANDERSON.  Senator,  "sufficient  for  the  day  is  the  evil  thereof." 
I  am  only  dealing  with  the  railroad,  and  am  estimating  these  bonds  as 
currency  bonds.  To  this  sixty-seven  millions  would  have  to  be  added 
the  fair  value  of  seventy-five  millions  of  preferred  stock,  which  would 
perhaps  be  from  twenty-five  to  thirty  millions,  estimating  that  preferred 
stock  as  salable  at  from  30  to  40  per  cent.  The  common  stock  I  do 


GOVERNMENT  DEBT   OF   THE   PACIFIC   RAILROADS.  39 

not  consider  as  having  any  available  money  value.  Its  only  value 
would  be  for  purposes  of  control.  These  figures  together  would  give 
about  $92,000,000  for  this  property  as  quite  the  market  value  of  the 
securities.  If  you  look  for  the  same  information  based  upon  the  earn- 
ing powers  of  the  property,  you  find  that  the  Union  Pacific  Eailroad 
Company  after  payment  of  all  operating  expenses,  after  payment  of 
taxes,  and  coming  down  to  the  fund  available  for  interest,  earned  about 
$4,300,000  in  the  year  1894.  The  earnings  for  1895  are  somewhat  better. 
But  during  the  year  1895  the  receivers  have  abstained  from  some 
peculiar  expenditures  which  were  made  in  1894 — a  large  amount  for 
new  rails.  So  that  perhaps  the  net  earnings  in  1895  would  be  rather 
a  larger  figure  than  it  would  be  safe  to  assume  as  representing  the  real 
earning  powers  of  the  property. 

The  CHAIRMAN.  Are  the  new  rails  charged  to  construction? 

Mr.  ANDERSON.  No,  sir;  everything  is  charged  to  operating  expenses. 
We  do  simply  a  cash  business.  Taking  the  estimated  earnings  as  be- 
tween $4,000,000  and  $4,200,000,  an  industrial  capitalization  (that  is,  a 
capitalization  to  be  used  for  trade  purposes)  would  be  regarded  as  being 
such  an  amount  as  at  6  per  cent  would  produce  that  income,  say, 
$80,000,000.  Then  if  you  take  the  valuation  of  eighty  millions  for  the 
property  you  will  have,  at  6  per  cent,  a  net  income  of  $4,800,000.  So 
that  whether  you  value  this  property  by  the  lien  (with  the  addition  of 
terminals),  or  whether  you  value  it  by  the  market  value  of  the  lot  of 
securities  to  be  issued,  or  whether  you  value  it  on  the  basis  of  its  fair 
earning  powers,  you  reach  the  conclusion  that  the  fair  market  value  of 
the  Union  Pacific  Kailroad  Company  is  something  between  $75,000,000 
and  $80,000,000.  That  is  the  fair  way  to  look  at  it. 

Senator  BRICE.  What  mileage  do  you  estimate  for  the  Union  Pacific 
line? 

Mr.  ANDERSON.  About  1,900  miles.  If  this  is  a  fair  way  to  look  at 
it,  then  the  remaining  element  to  be  determined,  in  order  to  answer  the 
question  whether  the  reorganization  plan  suggestions  are  fair  sugges- 
tions or  not,  we  would  have  to  deduct  from  the  valuation  as  reached 
the  amounts  which  must  be  taken  out  in  order  to  arrive  at  the  value  of 
the  Government  lien.  These  amounts  are,  first,  the  first-mortgage 
bonds,  some  $35,000,000  on  the  aided  portion  of  the  road;  then  the 
first-mortgage  bonds  on  those  parts  of  the  Union  Pacific  Eailrpad  Com- 
pany that  are  not  included  in  the  bond- aided  portion,  that  is  to  say, 
the  first-mortgage  bonds  between  a  point  394  miles  west  of  Kansas 
City  and  Denver,  and  thence  to  Cheyenne.  In  addition  to  that  an 
adjustment  would  have  to  be  made  with  the  holders  of  securities  on 
that  portion  of  the  railroad  which  the  Government  intends  to  acquire. 
Or,  at  any  rate,  we  must  ascertain  what  claims  would  have  to  be  taken 
out  of  that  seventy-five  or  eighty  million  dollars  before  reaching  the 
value  of  the  Government  lien.  Without  going  into  them  in  detail,  I 
would  say,  from  such  examination  as  I  have  given  to  it,  that  the  total 
amount  so  required  for  first  mortgage  on  parts  of  those  additions  and 
for  other  mortgages  which  are  claims  upon  parts  that  are  not  aided, 
and  are  not  first  mortgages,  would  be  about  $50,000,000. 

Senator  STEWART.  Does  that  cover  terminals? 

Mr.  ANDERSON.  It  covers  everything  that  would  have  to  be  taken 
out  of  the  value  in  order  to  determine  the  fair  value  of  the  Government 
lien.  Taking  that  $50,000,000  from  the  $85,000,000,  or  the  $92,000,000 
of  your  new  securities  as  representing  the  fair  value  of  the  road,  would 
give  you  a  basis  of  value  representing  the  lien  of  the  Government  as 
being  worth  from  $30,000,000  to  $40,000,000. 


40    '          GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

Senator  WOLCOTT.  Would  you  recommend  the  Government  to  accept 
that  in  cash  ? 

Mr.  ANDERSON.  I  would. 

Senator  WOLCOTT.  Do  you  consider  that  better  than  the  offer  of 
securities? 

Mr.  ANDERSON.  I  consider  it  better. 

Senator  WOLCOTT.  Would  you  consider  it  wise  and  good  for  the 
Government  to  accept  that  offer? 

Mr.  ANDERSON.  I  would. 

Senator  WOLCOTT.  If,  therefore,  the  Government  can  do  better  than 
that,  it  would  be  wise,  of  course,  to  postpone  our  acceptance  of  it. 
Suppose,  for  instance,  the  Government  can  have  security  for  a  greater 
amount  than  that  as  a  first  mortgage,  would  you  then  think  it  wise  to 
accept  it  ? 

Mr.  ANDERSON.  That  presents  a  different  question.  It  depends 
upon  who  makes  the  offer  and  how  it  is  secured.  If  somebody  offers 
the  Government  forty  millions,  of  course  it  is  better  to  take  that  forty 
millions  than  to  take  thirty-five  millions. 

Senator  WOLCOTT.  Taking  that  view,  that  $35,000,000  would  be  an 
offer  which  the  Government  should  accept,  you  base  it  upon  the  earning 
capacity  of  the  property,  do  you  ? 

Mr.  ANDERSON.  I  have  based  it  on  all  the  facts  I  have  given,  which 
lead  me  to  the  conclusion  that  the  difference  between  the  value  of 
the  property  and  the  claims  which  would  have  to  be  paid  and  adjusted 
does  not  exceed  $35,000,000. 

Senator  WOLCOTT.  You  think  that  this  sum  of  $35,000,000  it  would 
be  wiser  for  the  Government  to  accept  than  it  would  be  to  follow  the 
Government  directors'  scheme  of  putting  up  enough  money  to  cover  the 
prior  indebtedness  and  to  sell  the  property? 

Mr.  ANDERSON.  I  have  not  said  that. 

Senator  WOLCOTT.  I  ask  you,  do  you  think  so? 

Mr.  ANDERSON.  The  report  of  the  Government  directors  is  based 
upon  the  suggestion  of  the  combined  foreclosure  of  the  two  properties. 
The  explanations  that  I  have  given  to  the  committee  this  morning  are 
based  solely  on  the  question  of  adjusting  the  Union  Pacific  Railroad 
debt,  without  reference  to  the  Central  Pacific  at  all. 

Senator  WOLCOTT.  Do  you  consider  the  Central  Pacific  a  better 
security  for  the  advances  of  the  Government  than  the  Union  Pacific? 

Mr.  ANDERSON.  I  think  that  the  Central  Pacific  and  the  Union 
Pacific,  if  sold  together,  would  bring  more  money  than  the  Central 
Pacific  sold  by  itself,  and  the  Union  Pacific  sold  by  itself. 

Senator  WOLCOTT.  Do  you  think  that  the  lien  which  the  Government 
holds  on  the  Central  Pacific  has  a  greater  money  value  than  the  lien 
which  it  holds  on  the  Union  Pacific? 

Mr.  ANDERSON.  I  do  not. 

Senator  WOLCOTT.  If  this  $35,000,000  is  the  full  amount  that  the 
Government  can  expect  to  receive  from  the  Union  Pacific,  and  if  it 
could  do  equally  well  with  the  Central  Pacific,  would  you  think  it  a 
wiser  proposition  to  accept  these  sums  than  it  would  be  to  proceed 
upon  the  plan  suggested  by  the  Government  directors  ? 

Mr.  ANDERSON.  I  think  it  would,  because  the  plan  suggested  by  the 
Government  directors  is,  of  course,  somewhat  problematical  in  its  out- 
come and  issue;  whereas  an  offer  of,  say,  $65,000,000  in  cash,  in  gold 
eagles,  placed  upon  this  table,  would  have  the  tempting  characteristic 
of  being  an  absolute  certainty  not  liable  to  accidents  and  disappoint- 
ments, 


GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS.  41 

Senator  WOLCOTT.  The  net  earnings  of  the  Union  Pacific  Railroad 
(of  the  Government- aided  portions  of  it)  are  about  how  much? 

Mr.  ANDERSON.  The  net  earnings  of  the  Union  Pacific  in  1894  (includ- 
ing the  Government  transportation  in  that  sum)  were  $4,300,000,  but 
that  includes  the  aided  and  the  nonaided  parts  of  the  road. 

Senator  WOLCOTT.  Have  you  had  anything  to  do  with  the  application 
of  earnings? 

Mr.  ANDERSON.  A  good  deal. 

Senator  WOLCOTT.  Would  it  have  been  possible  for  the  receivers  to 
have  kept  the  interest  on  the  first-mortgage  bonds  paid? 

Mr.  ANDERSON.  If  they  had  refrained  from  putting  new  rails  upon 
the  property,  and  from  keeping  the  property  in  a  good  state  of  repair, 
it  would  have  been  possible. 

Senator  WOLCOTT.  If  you  had  paid  the  interest  on  the  first-mort- 
gage bonds,  would  you  have  been  compelled  to  leave  the  road  in  bad 
repair? 

Mr.  ANDERSON.  We  would  have  skimped  the  road  a  good  deal. 

Senator  WOLCOTT.  Has  there  been  no  diversion  of  the  earnings  of 
the  road  to  any  other  purpose  than  for  new  rails  and  repairs? 

Mr.  ANDERSON.  There  has  been  no  application  of  earnings  for  any 
purpose  except  on  application  to,  and  under  the  direction  of,  the  court. 
(To  Senator  Wolcott.)  What  do  you  mean  by  the  diversion  of  earnings? 

Senator  WOLCOTT.  The  testimony  of  Mr.  Pierce  shows  that  you  now 
have  in  contemplation  the  payment  of  back  interest.  There  has  been 
default  in  the  payment  of  coupons,  because  the  amount  of  money 
which  would  otherwise  have  been  paid  for  them  has  been  put  into  new 
rails  and  repairs. 

Mr.  ANDERSON.  We  have  plenty  of  money  on  hand.  The  judge  in 
charge  of  the  property  has  required  the  receivers,  before  parting  with 
their  funds  in  order  to  pay  mortgage  interest,  to  satisfy  him  very 
clearly  that  the  road  has  been  kept  up,  that  all  the  operating  obliga- 
tions have  been  met,  and  that  sufficient  funds  have  been  retained  to 
assure  the  continuance  of  that  policy  for  six  months  in  the  future. 

Senator  MORGAN.  You  mentioned  that  in  1895  the  net  income  of  the 
road  had  increased  ? 

Mr.  ANDERSON.  Yes. 

Senator  MORGAN.  About  how  much? 

Mr.  ANDERSON.  I  have  not  got  the  December  figures  yet,  but  I  think 
that  the  net  income  for  the  year  will  show  about  $5,000,000. 

Senator  MORGAN.  That  has  been  entirely  under  the  administration  of 
the  court? 

Mr.  ANDERSON.  Yes;  the  property  has  been  administered  under  the 
court  since  October,  1893. 

Senator  MORGAN.  Has  the  net  profit  continued  to  increase  all  the 
time  since  the  property  has  been  administered  by  the  court? 

Mr.  ANDERSON.  It  has  not;  it  went  into  the  slough  of  despond  in 
1894. 

Senator  MORGAN.  Has  the  court  found  it  necessary  to  put  any  debt 
upon  the  road  in  order  to  meet  this  falling  off  in  the  income? 

Mr.  ANDERSON.  No;  there  are  no  certificates  or  no  suggestion  of  a 
necessity  for  certificates. 

Senator  MORGAN.  And  no  money  has  been  advanced  or  borrowed? 

Mr.  ANDERSON.  No;  none  at  all.  We  have  a  large  deposit  on  hand 
to-day. 

Senator  MORGAN.  You  have  not  the  balance  sheet  with  you? 

Mr.  ANDERSON.  I  have  the  report  of  1894,  but  that  does  not  give  the 
information  you  request. 


42  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  So  that,  at  the  worst  stage  of  the  road  since  the 
receivers  have  been  appointed,  there  has  been  enough  net  income  to 
keep  the  road  in  repair  and  to  meet  obligations'? 

Mr.  ANDERSON.  Yes  j  and  to  meet  a  considerable  part  of  the  interest 
on  the  bonds. 

Senator  WOLCOTT.  Do  yon  share  the  view  of  Mr.  Pierce,  that  the 
Government  may  be  foreclosed  of  its  interest? 

Mr.  ANDERSON.  After  a  full  opportunity  for  the  Government  to 
appear  in  court  and  assert  its  right? 

Senator  WOLCOTT.  The  same  as  any  individual! 

Mr.  ANDERSON.  My  opinion  is  of  little  value.  The  question,  for 
ultimate  solution,  would  have  to  go  to  the  Supreme  Court  of  the  United 
States.  My  own  opinion  is  that  a  decree  of  sale,  issued  by  a  court  of 
competent  jurisdiction  after  full  service  and  notice  on  the  United 
States,  and  at  the  expiration  of  such  period  as  the  court  should  see  fit 
to  fix  for  the  Government  to  appear  and  plead,  and  after  decree  of  sale 
duly  entered,  and  after  a  sale  being  regularly  had,  the  title  to  all  the 
property,  rails,  rolling  stock,  and  terminals  would  pass  to  the  purchasers 
free  from  any  lien  whatever. 

Senator  WOLCOTT.  What  as  to  the  franchise? 

Mr.  ANDERSON.  I  do  not  think  that  the  purchasers  could  operate  the 
railroad  without  organizing  themselves  into  some  corporate  form,  either 
under  the  permission  of  the  United  States  or  under  permission  of  the 
States  where  the  road  is  located. 

Senator  WOLCOTT.. But  you  do  not  think  that  it  would  necessarily 
require  Government  assistance? 

Mr.  ANDERSON.  You  mean  to  pass  the  title  to  the  property? 

Senator  WOLCOTT.  Yes. 

Mr.  ANDERSON.  I  do  not. 

Senator  WOLCOTT.  Either  to  the  property  or  to  the  franchise? 

Mr.  ANDERSON.  I  do  not  say  as  to  the  franchise.  My  opinion  is  that 
the  purchasers  could  not  operate  the  railroad  as  a  corporation  without 
the  assistance  of  an  act  of  Congress  or  of  an  act  of  the  States  in  which 
the  road  is  operated. 

Senator  WOLCOTT.  But  if  they  could  procure  an  act  of  the  States  in 
which  the  road  is  operated  they  would  not  need  an  act  of  Congress. 

Mr.  ANDERSON.  They  would  have  their  own  rails  and  their  land  and 
their  rolling  stock;  and  if  the  States  of  Nebraska,  Colorado,  and 
Wyoming  should  choose  to  organize  them  as  a  corporation,  I  see  no 
reason  why  not. 

Senator  WOLCOTT.  There  are  five  receivers  of  the  Union-  Pacific 
Railroad,  are  there? 

Mr.  ANDERSON.  Yes. 

Senator  WOLCOTT.  Are  their  duties  divided  ? 

Mr.  ANDERSON.  Yes. 

Senator  WOLCOTT.  State  how  they  are  divided. 

Mr.  ANDERSON.  Mr.  S.  H.  Clarke  is  the  operating  receiver.  He  is 
constantly  on  the  property,  and  has  charge  of  all  those  questions  with 
which  you,  gentlemen,  are  familiar,  everything  being  under  his  direc- 
tion and  control.  Mr.  Mink  and  myself  have  charge  of  the  financial 
side  of  the  management  and  of  an  enormous  variety  of  legal  questions 
and  complications  that  present  themselves  from  time  to  time  and  have 
to  be  disposed  of.  We  also  participate  with  Mr.  Clarke  in  questions  of 
some  difficulty  in  relation  to  traffic  contracts,  or  in  relation  to  questions 
of  operation,  and  we  visit  the  property  from  time  to  time.  Messrs. 
Coudert  and  Doane  were  appointed  at  the  request  of  the  Government, 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  43 


and  take  an  active  part  in  the  discussion  of  general  questions  relating 
to  the  administration  of  the  property.  Mr.  Coudert  assists  us  on  many 
questions,  both  legal  questions  and  business  questions,  He  is  with  us 
from  time  to  time.  That  is  the  substantial  distribution  of  the  work. 

Senator  WOLCOTT.  You  spoke  of  the  traffic  being  diverted  from  the 
Union  Pacific  line  by  competing  lines  as  an  element  of  value,  and  you 
mentioned  the  Missouri  Pacific.,  the  Southern  Pacific,  and  other  lines. 
Are  there  not  lines  which  do  not  run  across,  but  that  run  near  the  Union 
Pacific  line,  and  compete  with  it? 

Mr.  ANDERSON.  Yes;  there  is  a  great  competition  in  all  forms  of 
business.  Local  lines  compete  for  local  business. 

Senator  STEWART.  One  line  competing  as  far  as  Ogden? 

Mr.  ANDERSON.  There  are  lines  in  course  of  construction,  and  they 
all  seem  to  have  an  ambition  to  reach  the  Pacific,  just  as  every  American 
citizen  has  an  ambition  to  become  President. 

Senator  STEWART.  You  suggest  that  if  the  Central  Pacific  and  the 
Union  Pacific  were  sold  together,  the  line  would  be  more  valuable  than 
if  they  were  sold  separately  ? 

Mr.  ANDERSON.  Yes. 

Senator  STEWART.  Would  that  be  because  it  would  have  a  monopoly 
as  against  those  other  roads  that  are  attempting  to  get  to  the  Pacific 
Ocean  1 

Mr.  ANDERSON.  There  would  be  no  monopoly;  but  the  Union  Pacific, 
controlling  the  Central  Pacific,  would  be  protected  from  the  plans  of 
construction  which  now  exist  in  those  several  other  roads,  and  wouirt 
also  be  able  to  take  for  itself  a  larger  portion  of  the  California  business 
than  it  now  obtains.  Our  relations  to  the  Central  Pacific  are  friendly 
and  pleasant  in  many  ways;  but  they  naturally  take  all  they  can  by 
the  Southern  road,  and  only  give  us  what  is  necessary  to  preserve 
friendly  relations  with  us ;  whereas,  if  we  owned  the  Central  Pacific,  we 
would  take  very  much  more  business  than  the  Central  Pacific  now 
gives  us. 

Senator  STEWART.  But  the  Union  Pacific  controls  the  short  line  to 
Portland,  Oreg.  ? 

Mr.  ANDERSON.  No,  sir;  the  Oregon  Navigation  Company  has  been 
a  separate  corporation  since  July,  1894. 

Senator  STEWART.  How  far  does  the  short  line  extend? 

Mr.  ANDERSON.  To  Huntington,  about  400  miles  from  Portland. 

Senator  STEWART.  Then  the  Union  Pacific  does  not  control  the 
Oregon  Navigation  Company?  That  is  under  different  management? 

Mr.  ANDERSON.  Entirely.  I  may  add  that  the  short  line  will  prob- 
ably move  out  of  the  system  in  consequence  of  bankruptcy.  It  is  now 
in  the  process  of  foreclosure. 

Senator  STEWART.  That  line  does  not  come  into  the  reorganization 
plan? 

Mr.  ANDERSON.  It  does  not  come  into  Mr.  Pierce's  reorganization 
plan;  but  it  would  affect  the  interest  of  the  Union  Pacific  Company 
very  much  indeed  if  the  short  line  passed  from  it  into  the  hands  of  a 
hostile  organization. 

Senator  STEWART.  But  if  the  short  line  should  pass  into  the  same 
management,  it  would  be  a  pretty  strong  organization? 

Mr.  ANDERSON.  Even  without  the  short  Line,  the  Central  Pacific  and 
Union  Pacific  alone  would  be  a  splendid  property.  I  am  not  merely 
giving  my  own  opinion  on  that  point,  because  I  am  quite  familiar  with 
railroad  men,  and  I  am  giving  their  opinion.  That  is  the  opinion  of  Mr. 
Clarke,  our  operating  administrator. 


44  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  STEWART.  That  would  somewhat  damage  the  prospects  of 
these  ambitious  roads  that  are  trying  to  get  to  the  Pacific  Ocean,  would 
it  not? 

Mr.  ANDERSON.  It  would  prevent  their  poaching  upon  our  preserves. 

The  CHAIRMAN.  There  have  been  heretofore,  between  the  Union 
Pacific  and  those  roads  that  you  have  mentioned,  close  running  arrange- 
ments and  good  railroad  comity? 

Mr.  ANDERSON.  Railroad  comity  is  always  as  problematical  as  court 
comity.  We  have  friendly  relations,  but  they  are  disturbed  occa- 
sionally. 

The  CHAIRMAN.  Is  it  not  a  fact  that  a  large  number  of  persons  hav- 
ing interests  in  the  Union  Pacific  Kailroad  are  also  interested  in  other 
lines? 

Mr.  ANDERSON.  Yes  j  in  the  short  line. 

The  CHAIRMAN.  You  spoke  of  an  arrangement  whereby  both  the 
Union  Pacific  and  the  Central  Pacific  should  be  foreclosed  coming 
under  one  ownership  and  management. 

Mr.  ANDERSON.  Yes,  sir. 

The  CHAIRMAN.  If  the  Government  bid  it  in  that  would  result  in 
Government  ownership  of  the  line  and  in  Government  operation  of  the 
line? 

Mr.  ANDERSON.  Not  necessarily.  In  the  report  of  the  Government 
directors  the  suggestion  is  made  that  if  the  upset  or  minimum  price  is 
not  bid  the  operation  of  the  road  shall  remain  in  charge  of  the  court 
until  the  next  session  of  Congress,  when  further  action  can  be  taken. 

The  CHAIRMAN.  That  would  be  virtual  ownership  of  the  road  by  the 
Government. 

Mr.  ANDERSON.  So  it  is  to-day.  It  is  Government  ownership  to-day 
in  that  sense.  One  of  the  departments  of  the  Government  is  running 
that  road. 

The  CHAIRMAN.  It  has  been  claimed  by  a  good  many  persons  that 
by  virtue  of  the  fact  that  the  Government  was  a  creditor  of  these  cor- 
porations these  lines  can  not  be  foreclosed  by  the  first-mortgage  holders 
on  the  general  principle  that  you  can  not  sue  the  Government.  Is  it 
your  opinion  that  a  suit  brought  by  the  first- mortgage  bondholders 
would  hold  as  against  the  Government? 

Mr.  ANDERSON.  I  have  already  said  that  I  think  a  regular  decree  of 
sale  would  pass  the  right  to  the  property  free  from  the  Government 
lien  ? 

The  CHAIRMAN.  Not  including  the  franchise? 

Mr.  ANDERSON.  The  legal  title  to  the  franchise  would  merge,  but  the 
road  could  not  be  used  or  operated  by  the  purchaser  without  the  assist- 
ance of  the  Government. 

The  CHAIRMAN.  Without  the  consent  of  the  Government? 

Mr.  ANDERSON.  Without  a  charter  from  the  Government  or  from  the 
States. 

The  CHAIRMAN.  Then,  in  other  words,  the  purchaser  buying  undei 
the  foreclosure  would  simply  hold  the  property  ? 

Mr.  ANDERSON.  Unless  he  could  get  some  authority  from  some  sov- 
ereign power  to  use  it. 

Senator  BRICE.  Do  you  hold  that  this  sale  would  cut  off  the  equities 
of  redemption  in  the  Government,  in  case  the  Government  saw  fit  at  a 
future  time  to  redeem  it? 

Mr.  ANDERSON.  I  have  stated  what  I  think,  but  individual  opinions 
are  of  little  value.  That  is  my  opinion,  however.  Let  me  say,  in  expla 
nation  of  the  question  of  Senator  Stewart  to  Mr.  Pierce,  that  the  dis- 


GOVERNMENT   DEBT   OF   THE    PACIFIC   RAILROADS.  45 

tinction  between  contracts  made  by  the  Government  under  authority 
of  law  which  are  not  enforceable  by  process  of  law,  and  the  present 
case  is,  that  the  title  of  the  first-mortgage  bondholders  is  directly 
declared  by  the  act  of  Congress  to  be  prior  to  that  of  the  Government, 
and  the  Government  lien  declared  to  be  subordinate,  whereas,  in  the 
case  of  a  contract,  the  rights  of  the  parties  are  clearly,  at  most,  equal, 
and  there  can  be  no  indication  by  the  Government  that  it  intends  to 
put  its  rights  below  the  rights  of  the  other  party  to  the  contract. 

Senator  BRICE.  With  respect  to  the  sale  under  the  first  mortgage 
and  to  the  purchase  at  such  sale  by  some  individuals,  is  it  not  usual, 
where  there  is  a  lack  of  power  in  the  final  organization,  for  the  pur- 
chaser to  operate  as  purchaser,  and  would  he  not  be  compelled  in  that 
case  to  continue  the  operation  of  the  road  in  all  respects  precisely  as  it 
was  operated  by  the  receiver  or  company,  until  some  action  is  taken 
by  the  Government  or  by  the  States  ? 

Mr.  ANDERSON.  I  presume  that  the  court  (and  I  have  known  it  to  do 
so)  would  continue  the  operation  of  the  road  until  the  purchaser  was 
prepared  to  undertake  to  discharge  the  rights  which  the  public  has  to 
have,  the  railroad  property  administered  so  as  to  carry  passengers  and 
freight. 

Senator  BRICE.  The  purchaser  would  be  obliged  to  fulfill  his  func- 
tions as  a  common  carrier.  Let  me  ask  you  as  to  the  Union  Pacific 
Railroad  Company.  I  understood  Mr.  Pierce  to  state  the  underlying 
first-mortgage  bonds  to  amount  to  a  total  of  $33,532,000. 

Mr.  ANDERSON.  That  is  the  amount  of  the  underlying  first-mortgage 
bonds  on  the  bond-aided  portion  of  the  railroad. 

Senator  BRICE.  Therefore  there  was  an  equal  amount  of  Govern- 
ment bonds  issued,  secured  by  a  second  lien  on  this  same  portion  of  the 
road? 

Mr.  ANDERSON.  Yes. 

Senator  BRICE.  Making  $33,532,000  more,  on  which  there  has  accrued 
about  $35,000,000  of  interest,  making  some  sixty-eight  and  a  half  mil- 
lions, having  no  reference  as  yet  to  the  sinking  fund? 

Mr.  ANDERSON.  I  have  not  the  gross  figures  in  my  head.  I  should 
have  supposed  the  interest  to  be  more  than  that. 

Senator  BRICE.  Then  $35,000,000  of  interest  is  not  an  overestimate? 

Mr.  ANDERSON.  No. 

Senator  BRICE.  All  the  other  classes  of  bonds  which  it  is  proposed, 
under  the  scheme  which  Mr.  Pierce  has  submitted,  amounts  to  a  total 
of  $33,762,000.  That  would  make  a  total  bonded  indebtedness  of 
$135,000,000,  or  about  that  sum,  would  it  not? 

Mr.  ANDERSON.  I  have  no  doubt.  But  I  have  not  Mr.  Pierce's  plan 
in  my  head,  nor  before  me,  and  I  do  not  know  what  he  has  included  in  it. 

Senator  BRICE.  Then  this  seems  to  be  subject  to  a  reduction  of  about 
fifteen  millions,  or  the  amount  of  the  sinking  fund? 

Mr.  ANDERSON.  Do  I  understand  you  to  be  quoting  from  page  6  of 
the  plan? 

Senator  BRICE.  From  pages  6  and  7 — excluding  the  collateral  trust 
bonds  which  are  not  included  in  this  scheme  of  reorganization. 

Mr.  ANDERSON.  Do  you  exclude  also  the  collateral  trust  notes? 

Senator  BRICE.  I  exclude  them.  They  are  marked  in  the  margin  as 
"  not  embraced  in  reorganization." 

Mr.  ANDERSON.  What  is  the  total  you  have  reached? 

Senator  BRICE.  One  hundred  and  thirty-five  million  dollars,  or  more. 

Mr.  ANDERSON.  That  includes  the  entire  Government  debt! 

Senator  BRICE.  It  does. 


46  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  ANDERSON.  And  the  funded  debt  which  is  included  in  the  reorgan- 
ization scheme? 

Senator  BRICE.  Yes. 

Mr.  ANDERSON.  Then  what  is  your  question  ? 

Senator  BRICE.  That  is  subject  to  a  reduction  of  about  $15,000,000 
from  the  sinking  fund? 

Mr.  ANDERSON.  The  net  Government  debt  is  ascertained  by  reducing 
from  the  gross  Government  debt  the  amount  of  the  sinking  fund. 

Senator  BRICE.  Inasmuch  as  that  has  not  been  done,  I  prefer  to  deal 
with  it  as  a  separate  item,  because  the  sinking  fund  may  or  may  not 
produce  the  sum  estimated.  What  is  the  nominal  amount  of  the  sink- 
ing fund? 

Mr.  ANDERSON.  The  sinking  fund  of  the  Union  Pacific  Eailroad 
Company  is  $15,000,000,  fourteen  millions  in  bonds  and  one  million  in 
cash. 

Senator  BRICE.  And  that  would  leave  one  hundred  and  twenty  mil- 
lions of  debt? 

Mr.  ANDERSON.  Yes;  assuming  $135,000,000  to  be  accurate. 

Senator  BRICE.  Is  this  railroad  of  1,825  miles  capable  of  earning, 
one  year  with  another,  4  per  cent  upon  $120,000,000? 

Mr.  ANDERSON.  It  is  just  able,  but  it  would  be  close  work. 

Senator  BRICE.  Tell  the  committee  the  present  conditions  of  this 
litigation,  with  reference  to  any  imminent  danger  of  a  decree  of  fore- 
closure on  the  part  of  the  first-mortgage  bondholders ;  in  what  courts 
are  bills  for  foreclosure  pending;  what  stage  have  they  reached,  and 
what  probability  is  there  of  an  early  decree? 

Mr.  ANDERSON.  The  best  answer  to  those  questions  is  in  the  report 
of  the  Government  directors,  which  contains  specific  reference  to  all 
the  suits  pending  and  a  discussion  of  the  questions  which  the  Senator 
has  put  to  me. 

Senator  BRICE.  Has  anything  occurred  since  that  time  in  the  way  of 
advancing  those  proceedings? 

Mr.  ANDERSON.  I  think  not. 

Senator  BRICE.  Or  by  way  of  interest  payment  on  the  part  of  receiv- 
ers or  of  the  company  reducing  the  liability  to  a  decree? 

Mr.  ANDERSON.  There  have  been  interest  payments,  but  there  have 
been  also  fresh  defaults. 

Senator  BRICE.  So  that  the  situation,  on  the  whole,  has  not  substan- 
tially changed  since  the  date  of  that  Government  report? 

Mr.  ANDERSON.  It  has  not.  It  is  not  my  opinion  that  there  is  any 
immediate  danger  of  a  decree  being  attempted  to  be  obtained. 

Senator  BRICE.  In  case  the  Government  should  direct  its  proper 
officer  to  appear  in  those  suits  and  consent  to  a  foreclosure  decree 
being  entered,  is  there  anything  in  the  proceedings  which  would  prevent 
that  being  done? 

Mr.  ANDERSON.  Nothing  whatever. 

Senator  BRICE.  Then  a  speedy  decree,  with  the  assistance  of  the 
Government,  might  be  obtained,  and  a  perfect  title  to  the  property 
transferred  to  a  purchaser? 

Mr.  ANDERSON.  That  is  undoubtedly  so. 

Senator  BRICE.  If  there  was  a  proposition  made  to  the  Government 
by  a  purchaser  to  pay  off  the  first-mortgage  bonds  and  take  the  title, 
and  if  he  would  give  to  the  Government  a  first  lien  on  the  entire  prop- 
erty now  covered  by  the  Government  lien  for  the  full  face  of  the  Gov- 
ernment debt,  including  interest  at  a  reasonable  rate,  would  that  be  a 
good  proposition  for  the  Government  to  accept? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  47 

Mr.  ANDERSON.  That  would  depend  on  the  rate  of  interest. 

Senator  BRICE.  Sny  3  per  cent,  secured  by  a  first  lien. 

Mr.  ANDERSON.  On  the  whole  1,400  miles  known  as  the  bond-aided 
portion  of  the  Union  Pacific,  I  think  that  would  be  a  good  proposition. 

Senator  BRICE.  If  the  rate  of  interest  was  larger  than  3  per  cent, 
your  opinion  would  be  still  strengthened? 

Mr.  ANDERSON.  Yes,  sir. 

Senator  BRICE.  Suppose  the  rate  of  interest  was  2  per  cent,  with  a 
sinking  fund  secured  by  a  first  mortgage? 

Mr.  ANDERSON.  I  do  not  think  that  that  would  be  as  good  as  a  cash 
payment  of  $35,000,000. 

Senator  FRYE  (to  Senator  Brice).  You  exclude  from  that  question 
the  terminals? 

Senator  BRICE.  No,  sir;  I  include  all. 

Senator  FRYE.  The  terminals  are  not  a  part  of  the  bond-aided  road. 

Senator  BRICE.  I  include  the  property  now  covered  by  the  Govern- 
ment lien. 

Senator  WOLCOTT  (to  Mr.  Anderson).  If  a  mortgage  drawing  3  per 
cent  interest  on  the  1,400  miles  covered  by  the  Government  loan  would 
be  a  good  proposition  for  the  Government  to  accept,  better  than  thirty- 
five  millions  in  cash,  please  tell  us  why  a  mortgage  drawing  2  per  cent, 
covering  the  whole  amount  of  principal  and  interest  with  a  sinking  fund, 
is  not  better  than  50  per  cent  of  the  amount  in  cash?  Does  the  differ- 
ence of  1  per  cent  furnish  a  reason  why  the  Government  should  settle 
at  50  cents  on  the  dollar? 

Mr.  ANDERSON.  It  does.  A  2  per  cent  bond  is  only  worth  two-thirds 
of  a  3  per  cent  bond.  A  3  per  cent  bond  such  as  you  describe  may  be 
worth  60  cents  on  the  dollar,  and  a  2  per  cent  bond  would  be  worth 
only  40  cents  on  the  dollar,  as  the  security  is  not  very  good. 

Senator  STEWART.  In  speaking  of  that  security,  do  you  exclude  the 
terminals  ? 

Mr.  ANDERSON.  I  answered  the  Senator's  question  just  as  it  was  put. 
In  my  own  mind  I  think  it  quite  a  grave  question  whether  the  terminals 
are  now  covered  by  the  Government  lien  or  not. 

Senator  STEWART.  In  your  mind  you  did  include  the  terminals? 

Mr.  ANDERSON.  I  did  not.  I  can  not  say  that  my  mind  acted  on  that 
question  positively ;  but,  since  my  attention  has  been  called  to  it,  I 
should  rather,  for  safety's  sake,  assume  that  Senator  Brice's  question 
applied  solely  to  the  line  itself,  and  excluded  the  terminals. 

Senator  STEWART.  The  Government  would  be  much  better  secured 
if  the  lien  included  the  terminals? 

Mr.  ANDERSON.  Certainly;  outside  of  the  mere  value  of  the  termi- 
nals for  the  purpose  of  conducting  business  those  at  Council  Bluffs, 
Denver,  and  Kansas  City  are  of  great  value. 

Senator  MORGAN.  If  this  road  should  be  sold  for  a  lump  sum  it  would 
be  necessary  to  get  rid  of  these  suits,  or  else  to  get  a  decree  of  fore- 
closure pro  forma? 

Mr.  ANDERSON.  I  think  not.  If  the  reorganization  people  who  own 
the  bonds  choose  to  pay  the  United  Spates  $35,000,000  for  an  assign- 
ment of  its  lien  and  of  all  its  rights,  I  do  not  see  that  the  United  States 
would  have  anything  to  do  with  the  suits.  I  do  not  know  what  their 
proposition  is. 

Senator  MORGAN.  In  such  a  case  they  would  go  on  and  execute  their 
charter  powers,  running  the  road  just  as  it  is  run  now? 

Mr.  ANDERSON.  If  I  was  advising  the  reorganization  committee,  I 
should  couple  the  payment  of  the  $35,000,000  to  the  United  States  with 


48  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

a  provision  intended  for  the  benefit  of  all  parties:  that  permission  should 
be  given  to  the  persons  making  this  payment  to  purchase  all  the  property 
under  foreclosure  and  to  extend  a  new  charter  to  the  company,  with 
such  rights,  powers,  and  privileges  as  might  be  deemed  proper  and  just; 
and  I  should  couple  the  extension  of  these  rights  and  powers  with  such 
safeguards  as  to  the  rights  of  the  company  and  to  the  management  of 
the  property  as  Congress  might  think  proper. 

Senator  MORGAN.  I  suppose  you  have  not  considered  the  question 
whether,  in  getting  a  new  charter,  it  would  be  necessary  also  to  get  the 
consent  of  the  States  through  which  the  road  runs? 

Mr.  ANDERSON.  I  have  considered  that  question  to  some  extent,  and 
I  do  not  think  it  necessary  to  obtain  the  consent  of  the  States. 

Senator  MORGAN.  There  might  be  a  serious  difference  of  opinion 
about  that,  and,  if  there  was,  that  would  be  a  vital  question  to  be  settled, 
would  it  not? 

Mr.  ANDERSON.  Not  vital  on  the  question  of  paying  $35,000,000. 

Senator  MORGAN.  No;  but  on  the  question  of  conducting  the  road 
afterwards. 

Mr.  ANDERSON.  I  think  that  the  parties  who  make  the  payment 
would  take  the  risk  of  that.  We  all  take  risks  in  this  world. 

Senator  MORGAN.  Suppose  it  should  become  necessary  to  get  rid  of 
these  lawsuits.  In  order  to  complete  the  plan  of  the  payment  of  a 
lump  sum,  and  to  transfer  the  property  to  the  keeping  of  a  new  com- 
pany, do  you  think  that  that  could  be  accomplished  by  any  means  within 
your  mind?  Do  you  know  any  means  by  which  it  could  be  done? 

Mr.  ANDERSON.  I  only  know  the  fact  that  the  reorganization  com- 
mittee states  that  it  has  on  deposit  a  majority  of  all  the  bonds  repre- 
sented in  any  of  their  litigations;  and,  if  that  be  so,  the  reorganization 
committee  can,  of  course,  control  all  the  litigations. 

Senator  MORGAN.  Would  the  ownership  of  a  majority  of  the  bonds 
give  to  that  majority  the  legal  right  to  make  some  arrangement  to 
which  the  holders  of  the  remainder  of  the  bonds  have  not  consented1? 

Mr.  ANDERSON.  No,  sir;  the  remainder  may  insist  on  continuing  the 
proceedings  for  foreclosure. 

Senator  MORGAN.  If  you  owned  $10,000  of  bonds  and  I  owned 
$5,000,  do  you  think  you  would  have  a  perfect  right  to  control  me  in 
the  matter? 

Mr.  ANDERSON.  No ;  I  withdraw  my  statement  about  the  reorganiza- 
tion committee  controlling  the  outstanding  bondholders.  They  could 
insist  on  continuing  the  proceedings  for  foreclosure  and  sale? 

Senator  MORGAN.  Then  the  outstanding  bondholders  may  be  insist- 
ing on  one  proposition  and  the  other  parties  insisting  on  a  different 
one? 

Mr.  ANDERSON.  Yes;  it  often  happens  that  a  minority  of  bondholders 
desire  foreclosure,  and  that  a  majority  desire  to  stop  foreclosure  pro- 
ceedings, or  vice  versa. 

Senator  MORGAN.  Would  not  that  very  fact  make  it  necessary  for 
the  court  to  interpose  its  authority  and  make  a  decree,  to  which  these 
people  would  be  bound  to  render, obedience,  so  that  their  interest  should 
go  along  with  the  interest  of  the  majority? 

Mr.  ANDERSON.  I  should  say  that  there  will  have  to  be  a  decree  of 
sale,  and  a  sale  of  the  property,  whether  the  minority  bondholders  are 
willing  to  discontinue  proceedings  or  not.  The  matter  can  not  get 
along  without  a  foreclosure,  because  the  Union  Pacific  Railroad  Com- 
pany has  pending  against  it  something  like  fifteen  millions  worth  of 
claims  arising  out  of  contracts. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  49 

Senator  MORGAN.  So  that,  in  any  event,  there  would  have  to  be  a 
prosecution  of  these  lawsuits  to  a  final  decree,  and  a  settlement  in 
court  of  all  the  equities  of  all  the  parties  interested? 

Mr.  ANDERSON.  That  is  my  opinion. 

Senator  MORGAN.  The  road,  as  I  understand  you,  is  more  prosperous 
under  the  present  management  than  it  was  formerly1? 

Mr.  ANDERSON.  I  do  not  think  so.  It  is  more  prosperous  somewhat, 
I  suppose,  in  1895  than  it  was  in  1894. 

Senator  MORGAN.  How  does  1895  compare  with  1892? 

Mr.  ANDERSON.  It  does  not  rival  1892;  1892  eclipses  it  completely. 
So  do  did  1891,  and  so  did  the  first  half  of  1893. 

Senator  MORGAN.  But  there  is  a  great  recovery  of  prosperity  ? 

Mr.  ANDERSON.  I  wish  I  could  see  it.  The  percentage  of  increased 
gross  earnings  since  the  1st  of  November,  1895,  is  perhaps  5  or  0  per 
cent  greater  as  compared  with  the  same  part  of  1894,  which  was  the 
lowest  point  of  our  Government  career. 

Senator  MORGAN.  Still,  the  prospect  of  success  is  increasing? 

Mr.  ANDERSON.  If  they  have  good  crops  in  that  region,  and  can  find 
markets  for  them,  the  road  will  improve  and  its  earnings  will  increase. 

Senator  MORGAN.  You  depend  for  that  on  the  increased  development 
and  the  good  fortune  of  the  people  of  the  region  tributary  to  the  road? 

Mr.  ANDERSON.  Yes,  sir. 

Senator  MORGAN.  And  on  that  alone? 

Mr.  ANDERSON.  Good  management  is  of  course  a  factor,  but  the 
prosperity  of  the  country  served  by  the  railroad  is  the  dominating  and 
controlling  figure  in  determining  the  prosperity  of  the  railroad  itself. 

Senator  MORGAN.  To  which  you  think  something  might  be  added,  if 
the  road  formed  a  really  friendly  connection  with  the  Central  Pacific  ? 

Mr.  ANDERSON.  Yes,  sir.  The  relative  prosperity  of  the  Union  Pacific 
might  come  from  its  controlling  more  of  the  freight  business  of  Califor- 
nia and  more  local  business  than  at  present.  Then  it  would  make  much 
more  money  than  it  does  at  present. 

Senator  MORGAN.  What  does  the  little  increase  of  prosperity  which 
you  speak  of  come  from?  Does  it  come  from  good  management  or 
from  increased  resources? 

Mr.  ANDERSON.  I  would  not  call  it  an  increase  of  prosperity.  That 
is  too  dignified  a  name. 

Senator  MORGAN.  Then  call  it  an  increase  of  the  sum  of  gross  earn- 
ings. 

Mr.  ANDERSON.  The  increase  runs  perhaps  from  $50,000  to  $100,000 
a  month. 

Senator  MORGAN.  What  does  it  come  from  ? 

Mr.  ANDERSON.  I  can  not  tell  without  analyzing  the  passenger  and 
freight  returns. 

Senator  MORGAN.  It  is  not  due  to  better  management,  is  it? 

Mr.  ANDERSON.  Noj  I  think  we  managed  that  road  quite  as  well 
when  it  saw  its  worst  days  as  we  do  to-day. 

The  CHAIRMAN.  Is  there  any  lessening  of  the  expenses? 

Mr.  ANDERSON.  Yes ;  of  course,  the  expenses  naturally  go  down  when 
the  gross  business  decreases,  and  we  have  also  decreased  them  by  a 
careful  attention  to  a  number  of  things  under  our  control. 

The  CHAIRMAN.  You  have  been  more  careful  than  formerly,  have 
you? 

Mr.  ANDERSON.  We  have  abstained  from  expending  money  for 
rails,  when  we  would  have  been  willing  to  spend  it  if  money  had  been 
perfectly  easy ;  we  have  abstained  from  any  extravagance. 


50  GOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS. 

Senator  STEWART.  Are  you  able  to  estimate  roughly  the  railroad's 
proportion  of  through  freight  and  local  business1? 

Mr.  ANDERSON.  I  would  not  undertake  to  state  those  figures,  but 
they  will  be  called  for,  and  I  will  have  them  for  the  committee  on  my 
return  from  New  York. 

Senator  STEWART.  You  have  the  figures  accessible  ? 

Mr.  ANDERSON.  Yes. 

Senator  WOLCOTT.  You  do  not  mean  to  say,  of  course,  that  2  per 
cent  bonds  are  worth  only  half  as  much  as  3  per  cent  bonds,  without 
having  relation  to  the  amount  of  the  sinking  fund? 

Mr.  ANDERSON.  I  do  not  think  that  the  sinking  fund  has  anything 
to  do  with  it. 

Senator  WOLCOTT.  Does  it  not  add  to  the  market  value  of  the  bonds'? 

Mr.  ANDERSON.  You  were  asking  me  to  compare  3  per  cent  bonds 
with  2  per  cent  bonds. 

Senator  WOLCOT^.  With  a  sinking  fund,  you  said  that  2  per  cent 
bonds  were  not  as  good  as  50  cents  on  the  dollar  in  payment  of  the 
Government  debt,  and  you  said  that  2  per  cent  bonds  were  only  two- 
thirds  as  good  as  3  per  cent  bonds.  Do  you  make  that  statement  with- 
out taking  into  consideration  the  sinking  fund? 

Mr.  ANDERSON.  I  meant  that  if  the  bond  has  a  long  time  to  run,  say 
fifty  years,  a  2  per  cent  is  only  two-thirds  as  good  as  a  3  per  cent  bond. 

Senator  WOLCOTT.  Do  you  consider  a  fifty-year  2  per  cent  bond, 
with  a  fair  sinking  fund,  worth  only  50  per  cent  as  much  as  a  3  per  cent 
bond? 

Mr.  ANDERSON.  If  the  3  per  cent  bond,  without  a  sinking  fund,  is 
perfectly  well  secured,  a  2  per  cent  bond,  even  with  a  sinking  fund,  is 
worth  very  little  more  than  half  of  a  3  per  cent  bond,  if  the  period  be 
long  enough.  In  a  fifty-year  bond  it  would  be  worth  something  more, 
for  the  period  is  not  long  enough.  You  can  compute  the  exact  value 
of  a  2  per  cent  bond  running  one  hundred  years  as  compared  with  a  3 
per  cent  bond  running  the  same  period  and  you  will  find  that  while 
there  is  a  difference,  arising  out  of  the  fact  that  the  period  is  not  indefi- 
nite in  favor  of  the  2  per  cent,  which  makes  it  worth  a  little  more  than 
two-thirds,  the  diiference  is  extremely  small;  it  is  less  than  three- 
fourths. 

Senator  BRICE.  The  fact  that  interest  is  paid  during  the  whole  time 
does  not  change  the  character  of  the  answer  you  gave  to  me  ? 

Mr.  ANDERSON.  Not  at  all. 

Senator  MORGAN.  Are  you  familiar  with  the  great  sweep  of  country 
tributary  to  the  Union  Pacific  Eailroad  ? 

Mr.  ANDERSON.  I  have  been  over  it  very  often,  but  I  am  not  familiar 
with  it  in  the  sense  of  understanding  its  traffic  relations. 

Senator  MORGAN.  Is  there  a  large  immigration  to  that  country  now? 

Mr.  ANDERSON.  Not  in  Nebraska.  Nebraska  is  the  most  unhappy 
corner  in  the  United  States.  For  the  last  two  years  the  crops  have 
been  disastrous.  I  have  heard  Mr.  Clarke  estimate  the  number  of 
people  who  left  Nebraska  in  1894  as  high  as  100,000.  I  speak  of  west- 
ern Nebraska.  The  Snake  Piver  country  is  a  beautiful  country,  and 
there  is  quite  a  large  settlement  out  there.  There  is  quite  a  large 
area  of  beautiful  land  on  the  Snake  Eiver.  It  is  not  over  3,000  feet 
above  the  level  of  the  sea,  and  in  that  respect  it  is  much  more  desira- 
ble than  the  land  in  Wyoming  and  Utah. 

Senator  MORGAN.  They  are  making  those  lauds  valuable  by  irriga- 
tion? 

Mr.  ANDERSON.  Yes. 


ftoTia.tr 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  51 


Senator  MORGAN.  Would  you  not  say  that  this  country  has  pro- 
gressed compared  to  what  it  was  twenty  years  ago  ? 

Mr.  ANDERSON.  Yes,  taking  it  as  a  whole,  I  would.  There  are  some 
parts  where  progress  has  not  been  appreciable. 

Senator  MORGAN.  Would  you  say  that  it  would  be  a  safe  calculation 
that  a  railroad,  properly  conducted,  for  the  next  hundred  years  would 
be  a  very  useful  and  profitable  property  in  that  country? 

Mr.  ANDERSON.  It  would  be  a  very  useful  property. 

Senator  MORGAN.  What  would  be  your  estimate  of  its  profits? 

Mr.  ANDERSON.  That  depends  so  much  on  the  considerations  of 
management  and  competition  and  of  prices  of  products  grown  in  that 
country  that  I  can  not  form  any  estimate. 

Senator  MORGAN.  Placing  up  all  difference  of  management,  etc., 
against  the  influx  of  population  and  the  known  fertility  of  the  soil 
with  the  aid  of  irrigation,  what  would  you  say  would  be  the  profit  to 
a  railroad  company  which  would  get  this  property  at  $35,000,000  dur- 
ing the  next  hundred  years? 

Mr.  ANDERSON.  I  am  not  able  to  form  any  estimate.  I  think  it  would 
be  a  good  property. 

Senator  MORGAN.  Do  you  think  it  would  be  an  enormous  one! 

Mr.  ANDERSON.  No,  sir. 

Senator  MORGAN.  Can  you  state  any  reason  why  there  would  not  be 
a  great  profit  in  it  at  $35,000,000? 

Mr.  ANDERSON.  The  whole  property  would'  cost  the  people  embark- 
ing in  the  enterprise  something  like  $100,000,000.  I  only  say  that, 
judging  from  the  experience  of  the  Santa  Fe  road,  the  Union  Pacific, 
the  Central  Pacific,  and  a  number  of  other  railroads  which  have  for  the 
last  twenty  or  thirty  years  expected  to  reap  profits  from  the  develop- 
ment of  the  West,  there  has  been  a  great  disappointment,  aud  most  of 
those  roads  have  gone  into  the  hands  of  receivers.  The  future  may  be 
no  better  than  the  past  has  been. 

Senator  MORGAN.  But  after  they  have  passed  into  the  hands  of 
receivers,  they  seem  to  be  able  to  pay  interest  on  their  first-mortgage 
bonds? 

Mr.  ANDERSON.  Yes;  but  that  is  not  exactly  making  an  enormous 
fortune. 

Senator  MORGAN.  You  say  that  there  are  about  $13,000,000  in  suit 
against  the  Union  Pacific  Eailroad  Company  ? 

Mr.  ANDERSON.  There  are  large  claims  existing  against  the  Union 
Pacific  as  a  corporation  which  can  not  be  adjusted  except  through  the 
intervention  of  a  foreclosure  and  sale. 

Senator  MORGAN.  These  claims  are  presented  to  different  tribunals, 
are  they  not  ? 

Mr.  ANDERSON.  No,  sir;  they  never  have  been  presented  in  court. 
There  is  not  a  sufficient  expectation  of  return  to  make  them  worth 
presenting. 

Senator  MORGAN.  Has  there  been  no  order  of  court  to  creditors  to 
come  in  and  prove  their  claims? 

Mr.  ANDERSON.  The  court  directs  the  receivers  to  pay  all  the  obliga- 
tions of  the  corporation  as  a  going  concern;  that  is,  all  that  have 
accrued  within  six  months  prior  to  our  appointment.  All  the  obliga- 
tions of  this  nature  we  have  paid. 

Senator  MORGAN.  But  there  has  not  been  a  creditors'  bill  to  invite 
creditors  to  prove  their  claims? 

Mr.  ANDERSON.  No.  The  original  stockholders'  bill  has  been  super- 
ceded  by  the  foreclosure  bill:  there  are  five  or  six  foreclosure  bills. 
That  is  the  present  attitude  of  the  matter. 


52  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  You  do  not  mean  that  there  are  five  or  six  fore- 
closure bills  in  the  same  court1? 

Mr.  ANDERSON.  No,  they  are  in  different  courts,  but  they  are  nearly 
all  within  the  eighth  circuit.  The  same  receivers  have  been  appointed 
in  all  the  bills,  so  as  to  preserve  the  integrity  of  the  property  as  far  as 
possible. 

Senator  MORGAN.  The  five  or  six  foreclosure  suits  are  being  con- 
ducted, I  suppose,  in  perfect  harmony! 

Mr.  ANDERSON.  Do  you  mean  as  far  as  the  administration  of  the 
property  is  concerned? 

Senator  MORGAN.  I  mean  in  harmony  between  the  courts 

Mr.  ANDERSON.  Yes 5  we  have  no  different  interests  between  the 
courts. 

Senator  MORGAN.  Which  court  is  considered  the  mother  court; 
which  sends  out  the  decrees  for  the  rest  of  them? 

Mr.  ANDERSON.  The  eighth  circuit. 

Senator  MORGAN.  And  the  other  courts,  without  differences,  have 
adopted  these  decrees  and  registered  them? 

Mr.  ANDERSON.  In  the  ninth  circuit  we  filed  ancillary  bills,  and  the 
ninth  circuit  acquiesces  in  all  the  proceedings  taken  in  the  eighth  cir- 
cuit. It  appoints  the  same  receivers  and  facilitates  their  operations  in 
every  way.  The  case  which  Mr.  Pierce  referred  to  was  a  case  arising  out 
of  an  application  to  appoint  a  separate  receiver  for  the  Oregon  Short 
Line.  In  that  case  Judge  Gilbert  delivered  an  opinion  in  which  he  made 
a  statement  in  regard  to  a  state  of  comity  as  between  different  courts, 
and  made  an  application  of  that  principle  to  that  very  application  for 
a  receiver. 

Senator  MORGAN.  No  court  of  the  whole  group  has  undertaken  to  set 
up  for  itself  or  to  set  up  its  own  jurisdiction  over  these  bills  except  the 
mother  court? 

Mr.  ANDERSON.  No,  sir ;  that  is  correct. 

Senator  MORGAN.  But  you  have  no  security  that  no  court  will  do  it? 
'  Mr.  ANDERSON.  No,  sir;  we  have  no  security  from  the  court. 

Senator  MORGAN.  There  is  nothing  to  constrain  these  other  tribunals 
to  regard  the  decrees  of  the  mother  court? 

Mr.  ANDERSON.  No,  sir. 

Senator  MORGAN.  So  that  in  the  winding  up  you  may  have  diffi- 
culties? 

Mr.  ANDERSON.  We  do  not  anticipate  them. 

Senator  BRICE.  The  Union  Pacific  Koad,  with  which  these  reorgani- 
zation plans  deal,  is  all  within  the  eighth  circuit,  is  it  not? 

Mr.  ANDERSON.  I  have  been  answering  in  regard  to  all  the  foreclo- 
sure suits  in  which  we  have  been  appointed  receivers,  the  Oregon  Short 
Line  as  well  as  the  Union  Pacific. 

Senator  MORGAN.  This  main  company,  the  Union  Pacific,  has  an 
interest  in  all  these  litigations? 

Mr.  ANDERSON.  No,  sir — or  an  interest  so  remote  that  it  counts  for 
nothing.  Let  me  explain:  The  Oregon  Short  Line  and  some  of  the 
other  roads  were  constructed  under  the  auspices  of  the  Union  Pacific. 
The  Union  Pacific  furnished  the  capital,  and  the  bonds  and  stocks  issued 
in  payment  went  first  to  the  Union  Pacific  as  the  constructor.  But 
in  order  to  provide  for  them,  the  Union  Pacific  collateral  trusts  were 
formed,  and  all  these  stocks  and  securities  are  held  in  these  collateral 
trusts.  The  collateral-trust  mortgages  are  not  counted  as  part  of  the 
debt  to  the  Government,  but  the  amount  due  on  them  will  entirely 
absorb  all  the  stocks  and  bonds  which  represent  any  control  of  the 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  53 

other  roads,  so  that  the  Union  Pacific,  as  such,  has  no  interest  in  the 
Oregon  Short  Line  which  could  be  counted  as  an  asset  of  any  value  at 
all.  All  that  it  has  is  an  owner's  equity,  which  would  remain  after  the 
obligations  were  discharged. 

Senator  MORGAN.  Looking  at  the  necessity  of  retaining  these  cases 
in  court  until  a  final  decree  is  made  (no  matter  what  arrangement),  are 
you  aware  that  a  number  of  learned  gentlemen  of  the  legal  profession 
insist  very  earnestly  that  what  are  called  the  second -mortgage  bonds 
are  really  first-mortgage  bonds'? 

Mr.  ANDERSON.  You  mean  that  the  Government  lien  has  priority  of 
the  first  mortgage? 

Senator  MORGAN.  Yes. 

Mr.  ANDERSON.  I  am  not  aware  of  a  claim  quite  in  that  shape,  but 
I  am  aware  that  a  claim  has  been  made  that  some  of  the  first- mort- 
gage bonds  issued  by  the  Union  Pacific  are  open  to  attack. 

Senator  MORGAN.  I  have  been  informed  that  both  these  questions 
arise. 

Mr.  ANDERSON.  I  have  not  heard  that  anybody  has  claimed  that  the 
Government  lien  is  prior  to  the  lien  which  is  known  as  the  first-mortgage 
bonds  of  the  Union  Pacific. 

Senator  MORGAN.  I  am  assured  that  such  an  insistence  is  expected 
to  be  made.  In  that  event  it  would  not  be  ever  possible  to  get  this  matter 
settled  except  by  a  decree  of  the  court? 

Mr.  ANDERSON.  I  have  already  stated  that  I  do  not  think  that  the 
relations  of  the  creditors  of  the  Union  Pacific,  as  they  seem  to-day,  can 
possibly  be  settled  except  through  the  intervention  of  a  final  decree 
and  sale. 

Senator  MORGAN.  A  mere  assignment  of  the  first  mortgage  would 
not  have  the  effect  to  settle  these  questions? 

Mr.  ANDERSON.  The  assignment  of  the  Government  lien  in  consider- 
ation of  a  lump  sum  of  $35,000,000  being  paid  would  not  terminate  the 
litigation. 

Senator  MORGAN.  It  would  merely  let  the  Government  out? 

Mr.  ANDERSON.  It  would  only  let  the  Government  out. 

Senator  BRICE.  Do  I  understand  you  to  say  that  the  gross  earnings 
of  the  Union  Pacific  were  somewhat  larger  in  1895  than  they  were  in 
1894? 

Mr.  ANDERSON.  I  said  that  the  net  earnings  were  larger. 

Senator  MORGAN.  How  about  the  gross  earnings  ? 

Mr.  ANDERSON.  I  think  they  were  about  the  same. 

Senator  BRICE.  I  find  a  statement  of  net  earnings  of  the  Union 
Pacific  on  page  9  of  this  book  (The  Plan  and  Agreement  to  Reorganize 
the  Union  Pacific  Eailroad),  showing  that  the  net  earnings  in  each  of 
the  nine  years  from  1885  to  1895  were  more  than  $6,000,000,  after  sub- 
tracting the  taxes,  except  for  the  calendar  year  1894,  when  the  net 
earnings  were  $4,315,000 ;  and  I  understand  you  to  say  that  the  net  earn- 
ings for  the  calendar  year  1895  have  been  about  five  millions? 

Mr.  ANDERSON.  Yes,  sir. 

Senator  BRICE.  My  inquiry  is  why  the  receivers,  in  the  three  years  in 
which  the  road  earned  more  than  twice  the  amount  required  to  pay  the 
interest  on  the  first-mortgage  bonds,  should  have  allowed  the  first- 
mortgage  bonds  to  become  foreclosable,  the  receivers  applying  the 
earnings  to  some  other  purpose,  so  as  to  afford  an  opportunity  to  the 
first-mortgage  bondholders  to  keep  out  the  Government? 

Mr.  ANDERSON.  I  answered  that  question  to  the  committee  in  1895, 
and  I  refer  this  committed  to  that  answer  for  details.  1  would  say,  how- 


54  GOVERNMENT   DEBT    OF    THE   PACIFIC   RAILROADS. 

ever,  in  explanation  of  the  question,  that  while  $4,315,000  represents 
the  amount  of  our  net  earnings,  a  sum  amounting  to  $1,200,000,  which 
forms  a  part  of  that  $4,315,000,  is  never  actually  received  by  the  rail- 
road. It  enters  into  the  account  of  earnings  and  is  charged  as  part  of 
the  receipts;  but  it  is  held  by  the  Government  of  the  United  States  as 
being  the  earnings  of  the  Union  Pacific  for  the  transportation  of  troops 
and  munitions  of  war,  and  under  the  provisions  of  the  Thurman  Act  it 
is  credited,  part  to  the  bond  and  interest  account  and  part  to  the  sink- 
ing fund.  So  that  that  reduces  what  I  should  call  the  fund  available  for 
interest  to  something  like  $3,000,000. 

The  CHAIRMAN.  The  sum  returned  by  the  Government  is  about 
$1,200,000  annually? 

Mr.  ANDERSON.  Yes;  eleven  or  twelve  hundred  thousand  dollars. 
Now,  if  you  examine  the  amount  falling  due  for  interest,  and  especially 
if  you  consider  the  fact  that  in  the  first  three  months  after  our  appoint 
rnent  we  paid  interest  rather  more  rapidly  than  we  should  have  done 
because  an  item  of  $600,000  on  the  first-mortgage  bonds  of  the  Northern 
Division  became  due  within  two  months  after  our  appointment,  so  that 
we  had  to  meet  that  out  of  two  months7  earnings  (two  poor  months), you 
will  see  that  the  whole  amount  received  by  us  was  not  sufficient  to  pre- 
vent the  bonds  becoming  foreclosable  because  of  the  failure  to  meet  cou- 
pons at  maturity. 

Senator  BRICE.  I  wish  that  at  you*  leisure  you  would  put  that  in 
such  terms  as  would  make  it  a  clear  answer  to  the  statement  (which 
confuses  any  attempt  to  judge  of  that  matter)  that  the  receivers  have 
not  paid  interest,  and  that  they  have  not  done  so  for  some  other  reason 
than  a  desire  to  properly  administer  their  trust,  as,  for  instance,  a 
desire  to  force  a  foreclosure. 

Mr.  ANDERSON.  The  receivers  are  absolutely  strangers  to  any  desire 
of  that  kind,  as  well  as  to  the  suggestion  which  has  been  made  that 
they  might  abstain  from  favoring  the  adjustment  in  order  to  retain 
their  office.  Such  a  statement  is  really  not  worthy  of  discussion. 

Senator  WOLCOTT.  You  did  not  understand  that  there  was  any  such 
suggestion  made  by  me  ? 

Mr.  ANDERSON.  Not  by  you ;  but  I  heard  that  that  suggestion  had 
been  made.  This  subject  of  the  application  of  money  to  pay  interest 
should  be  taken  in  connection  with  the  disposition  of  the  balance  which 
the  receivers  have  in  cash.  To-day  we  have  a  large  balance  of  money 
on  hand,  which  Judge  Sanford  does  not  permit  us  to  apply  to  the  pay- 
ment of  interest  without  making  full  provision  for  the  care  and  custody 
of  the  property,  and  to  prevent  the  possibility  of  any  division  of  the 
road  receiving  more  than  its  fair  share,  as  against  another  division. 

Senator  BRICE.  It  is  fair  to  the  receivers,  and  is  absolutely  neces- 
sary to  the  committee,  that  the  apparently  large  surplus  over  the  amount 
required  to  pay  the  interest  on  the  first-mortgage  bonds  should  be 
explained  in  connection  with  the  failure  to  keep  up  interest  payments. 

The  CHAIRMAN.  In  other  words,  to  remove  the  inference  which  the 
public  would  draw. 

Senator  BRICE.  And  after  hearing  the  statements  made  by  Mr.  Ander- 
son and  Mr.  Pierce  that  the  Government  could  be  foreclosed  of  all  its 
interest  in  the  property  by  reason  of  that  failure  to  pay  interest  on  the 
first-mortgage  bonds. 

Mr.  ANDERSON.  It  is  rather  by  reason  of  the  maturity  of  some  of  the 
first-mortgage  bonds. 

Senator  BRICE.  By  reason  of  anything  which  entitles  the  holders  of 
the  first  mortgage  bonds  to  a  decree. 


GOVERNMENT  DEBT   OF   THE   PACIFIC   RAILROADS.  55 

Mr.  ANDERSON.  I  think  that  the  overdue  interest  could  be  easily 
managed  if  the  bonds  had  not  begun  to  mature.  It  is  the  maturity  of 
the  bonds  which  is  the  serious  question. 


THE  CENTRAL,  PACIFIC. 
STATEMENT  OF  MR.  HUNTINGTON— Continued. 

Mr.  HUNTINGDON  said: 

I  expected  to  have  some  figures  this  morning,  but  I  did  not  get  them, 
and  therefore  would  prefer  to  wait.  I  organized  the  Central  Pacific 
Railroad  and  pretty  nearly  built  it.  I  was  going  to  say  just  a  word  to 
the  committee.  Our  Government  bonds  were  sold  for  gold,  and  did 
not  realize  more  than  40  cents  on  the  dollar,  and  we  used  the  gold  to 
build  the  road.  The  physical  obstructions  to  be  overcome  from  Sac 
ramento,  in  crossing  the  Sierra  Madre  Mountains  to  the  big  bend  of 
the  Truck ee  (138  miles),  was  said  by  good  engineers  to  make  that  part 
of  the  road  more  expensive  than  the  whole  1,032  miles  between  Ogden 
and  Omaha.  Everything  was  very  expensive  there  and  in  California. 
After  the  road  was  finished  we  had  to  build  the  snowsheds,  and  there 
was  198,800,000  feet  of  lumber  used  in  that  work.  I  have  seen  ten 
locomotives,  frequently,  behind  a  snowplow,  and  we  have  had  out  as 
many  as  fifteen  hundred  men  in  clearing  the  road  of  snow.  We  have 
paid  some  of  our  bonds,  have  kept  the  road  clean,  and  paid  all  our  cur- 
rent debts.  We  are  not  in  default  to  anybody.  The  Central  Pacific  is 
in  good  hands,  and  whatever  Congress  will  agree  to  in  the  matter  of 
the  Government  debt  will  be  done. 

Senator  MORGAN.  Why  did  you  not  use  silver  instead  of  gold  when 
you  built  the  road  ? 

Senator  STEWART.  Silver  was  at  that  time  worth  3  cents  on  the  dol- 
lar more  than  gold. 

Mr.  HUNTINGDON.  We  have  no  mortgage  on  our  rolling  stock ;  every- 
thing has  been  paid  and  kept  clean,  and  we  are  willing  to  pay  a  hun- 
dred cents  on  the  dollar  of  the  Government  debt  if  we  get  a  chance. 

SIOUX  CITY  AND  PACIFIC  RAILROAD. 
STATEMENT  OF  MR.  LITTLER— Continued. 

Mr.  DAVID  T.  LITTLER,  counsel  for  the  Chicago  and  Northwestern 
Railroad  Company,  addressed  the  committee.  He  said : 

The  bill  before  the  Senate  authorizes  the  appointment  of  three  Com- 
missioners with  power  to  adjust  and  settle  the  claim  of  the  United 
States  against  the  Sioux  City  and  Pacific  Railroad  Company. 

The  Sioux  City  and  Pacific  Railroad  Company  is  one  of  the  subsi- 
dized roads,  under  the  acts  of  Congress  of  1862  and  1864.  The  subsi- 
dized portions  of  this  road,  both  as  to  bonds  and  lands,  extend  from 
Sioux  City,  Iowa,  to  California  Junction,  in  said  State,  a  distance  of 
69.75  miles,  and  from  the  latter  point  to  Fremont,  Nebr.,  a  distance  of 
32.02  miles,  making  a  total  length  of  subsidized  road  of  101.77  miles. 

That  portion  of  the  road  from  California  Junction  to  Missouri  Valley 
is  5.84  miles  in  length,  and  was  not  subsidized. 

The  bond  subsidy  of  this  road  was  at  the  rate  of  $16,000  per  mile; 
making,  in  the  aggregate,  $1,628,320,  This  subsidy,  by  the  acts  of  Con- 
gress, is  made  subordinate  to  the  first  mortgage  of  the  company,  which 
was  also  for  $16,000  per  mile,  or  $1,628,320. 


5D  GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS. 

The  Government  subsidy  bonds  bear  date  as  follows: 

March  6, 1868 $792,000 

March  30, 1868 320,000 

March  3, 1869 576,320 

Interest  began  to  run  on  the  first  issue  March  10, 18G8 ;  on  the  second 
issue,  March  30,  1868,  and  on  the  third  issue,  March  3,  18G9. 

The  land  grant  to  this  company  amounted  to  60,000  acres.  The  com- 
pany received  under  this  grant  4,343.11  acres  in  the  State  of  Iowa  and 
37,055.12  acres  in  the  State  of  Nebraska,  making  a  total  of  41,398.23 
acres. 

Senator  Brice,  chairman  of  the  Committee  on  Pacific  Railroads,  in 
his  " partial  report"  on  the  Pacific  railroads,  of  date  January  28, 1895, 
in  speaking  of  this  company,  said: 

This  road  was  never  of  any  consequence  as  a  part  of  the  Union  Pacific  system ;  in 
fact,  as  the  commission  of  1887  said,  "the  road  is  of  but  slight  importance  and  it  is 
no  part  of  any  complete  system  of  railroads." 

From  the  time  of  the  completion  of  this  road  up  to  1884  its  history  is 
unimportant  and  wholly  unimportant  to  be  considered  in  connection 
with  the  bill  under  consideration.  In  1884  it  passed  under  the  control 
of  the  Chicago  and  Northwestern  Kailway  Company  by  the  purchase 
and  transfer  to  the  latter  of  nearly  all  its  capital  stock  and  is  now  a 
part  of  that  company's  through  line  from  Omaha  to  St.  Paul. 

For  a  more  detailed  history  of  the  Sioux  City  and  Pacific  Railroad 
Company,  from  the  date  of  its  organization  up  to  the  present  time,  ref- 
erence is  made  to  the  report  of  the  honorable  Commissioner  of  Railroads 
to  the  Secretary  of  the  Interior,  which  brings  the  history  of  the  company 
down  to  the  1  st  of  January,  1895. 

On  page  90  of  the  above  report  the  financial  condition  of  the  company 
is  stated  up  to  June  30, 1895,  and  is  as  follows: 

ASSETS. 

Cost  of  road,  fixtures,  and  equipments $5, 749, 007.  31 

Fuel,  material,  and  stores  on  hand 46,  732. 64 

Accounts  receivable 40, 920. 87 

Due  from  other  companies  on  account  of  traffic 7,  971. 83 

Half  Government  transportation  on  aided  road,  applied  to  bond  and 

interest  account 86,281.03 

Government  transportation  on  nonaided  road,  applied  to  bond  and 

interest  account 21,  255. 99 

Due  from  United  States,  unsettled  accounts 263,  951. 87 

Cash  on  hand 170,933.58 


Total 6,  387,  055. 12 


LIABILITIES. 

First-mortgage  bonds $1,628,000.00 

Interest  on  same,  due  and  accrued 1, 140. 00 

Interest  on  same,  accrued,  not  due 48, 840. 00 

United  States  subsidy  bonds 1,  628,  320. 00 

Interest  on  same,  paid  by  United  States 2,636,687.89 

Interest  on  preferred  stock,  accrued,  not  due 2,  957. 51 

Pay  rolls  and  vouchers 48, 110. 00 

Totaldebt 5,994,055.40 

Capital  stock 2,  068,  400. 00 


Total  stock  and  debt 8,  062, 455.  40 


Deficit 1,675,400,28 


Ear 
Pro 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  57 

Revenue  and  expenditures  for  year  ended  June  30,  1S95. 

REVENUE. 


Earnings $437,428.68 

Profit  and  loss 3, 832. 82 

Total $441,261.50 

EXPENDITURES. 

Operating  expenses $294,173.87 

Interest  on  first-mortgage  bonds 97,  680. 00 

Interest  on  other  funded  debt 97,  699. 20 

New  construction 64. 14 

New  equipment „ 47. 75 

Interest  on  preferred  stock 11,  830. 00 

Total $501,494.96 

Deficit 60, 233. 46 

The  United  States  Pacific  Railroad  Commission  in  discussing  the 
financial  resources  of  the  Sioux  City  and  Pacific  Railroad  Company  in 
connection  with  the  form  of  the  bill  drawn  by  the  Commission  for  the 
purpose  of  settling  the  Government  indebtedness,, on  page  128  of  its 
report,  states  among  other  things — 

It  is  very  doubtful  whether  the  above-named  company  could  meet  the  require- 
ments of  the  proposed  bill. 

The  financial  history  of  this  road  from  beginning  to  end  clearly 
establishes  the  proposition  that  the  subsidizing  of  the  road  was  an 
unfortunate  venture  for  the  Government.  As  already  stated  it  is  really 
no  part  of  the  great  system  of  roads  which  connected  the  Pacific 
Ocean  with  the  Missouri  River.  The  road  has  never  been  able  to  pay 
any  portion  of  the  principal  of  the  subsidy  bonds,  nor  any  consider- 
able part  of  the  interest. 

The  facts  presented  not  only  justify  but  require  Congress  to  provide 
some  means  by  which  the  Government  can  settle  and  ascertain  the 
value  of  its  lien  upon  the  property  of  the  company.  The  Chicago  and 
Northwestern  Railway  Company  is  willing  to  pay  in  cash  the  value  of 
that  lien  as  it  may  hereafter  be  established  by  testimony  to  be  taken  by 
the  Commission  authorized  by  the  bill  under  consideration.  The  bill 
confers  upon  the  Commissioners  absolute  power  to  settle  the  claim  of 
the  Government  with  the  company,  subject,  however,  to  the  approval 
of  the  President  of  the  United  States. 

Senator  FRYE.  Did  I  not  report  a  bill  for  the  settlement  of  the  debt 
of  this  road  ? 

Mr.  LITTLER.  You  did,  and  it  passed  the  Senate  without  opposition. 
In  view  of  my  experience  as  a  United  States  Pacific  Railroad  Commis- 
sioner, I  think  it  very  important  that  this  bill  should  be  amended  so  as 
to  authorize  a  majority  of  any  commission  which  may  be  appointed  to 
make  a  report.  There  might  be  one  contrary  man  on  the  committee. 

Senator  FRYE.  What  does  the  bill  require  now  t 

Mr.  LITTLER.  That  there  should  be  a  report  of  the  commission. 

Senator  FRYE.  Does  not  that  mean  a  report  of  the  majority  of  the 
commission  f 

Mr.  LITTLER.  No,  sir. 

Senator  FRYE.  Mr.  Coombs  desires  to  ask  Mr.  Littler  some  questions 
in  relation  to  his  figures. 

Mr.  COOMBS  (who  appears  before  the  committee  in  opposition  to  the 


58  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Sioux  City  and  Pacific  Railroad  bill)  said:  Mr.  Chairman,  a  part  of 
iny  proposition  is  that  a  bill  for  reorganization  is  substantially  a 
Chicago  and  North  western  proposition,  and  the  matter  on  which  I  will 
ask  you  to  hear  me  is  involved  somewhat  in  the  Sioux  City  and  Pacific 
road.  It  is  of  interest  to  know  what  its  relations  may  be  to  this 
matter.  The  Sioux  City  and  Pacific  Eailroad  was  completed  as  far  as 
the  valley  of  the  Missouri  in  the  spring  of  1868,  and  to  Fremont  in  18G9. 
I  believe,  Mr.  Littler,  it  had  no  bridge  across  the  Missouri  Eiver  until 
1883? 

Mr.  LITTLER.  I  think  so. 

The  CHAIRMAN.  It  has  no  bridge  now;  it  has  a  traffic  right  over  the 
Elkliorn  road. 

Mr.  LITTLER.  I  do  not  know  the  name  of  the  bridge,  as  it  has  nothing 
whatever  to  do  with  the  case. 

Mr.  COOMBS.  The  bridge  was  built  on  the  application  of  the  Sioux 
City  and  Pacific  road,  and  that  is  one  of  the  points  concerning  which  I 
want  to  ask  Mr.  Littler  some  questions. 

The  CHAIRMAN.  Is  not  that  called  the  Blair  Bridge! 

Mr.  COOMBS.  Yes.  From  1871  to  1879,  at  the  time  when  ten  miles 
of  the  Fremont,  Elkhorn  and  Missouri  Valley  road  was  built,  it  wa? 
underleased  to  the  Sioux  City,  was  it  not? 

Mr.  LITTLER.  You  will  find  a  complete  answer  to  that  inquiry  in  the 
last  report  of  the  United  States  Pacific  Eailroad  Commission.  I  do  not 
think  it  at  all  important  or  germain  to  this  bill,  and  did  not  mention  it 
in  my  remarks  to  the  committee.  You  will  find  the  whole  history  of  the 
road  in  the  report  of  the  United  States  Pacific  Kail  way  Commission. 

Mr.  COOMBS.  The  Fremont,  Elkhorn  and  Missouri  Valley  road,  and 
the  Sioux  City  and  Pacific  road,  are  there  reports  of  their  operations 
anywhere? 

Mr.  LITTLER.  Not  that  I  know  of. 

Mr.  COOMBS.  Governor  Pattison  made  a  report  at  one  time  in  which 
he  stated  that  Mr.  Blair's  books  for  the  construction  of  the  bridge  could 
not  be  found;  are  there  any  books  to  show  what  the  road  cost? 

Mr.  LITTLER.  You  will  find  by  reference  to  the  report  of  the  United 
States  Pacific  Eailroad  Commission  that  we  had  great  trouble  in  find- 
ing what  it  cost.  Mr.  Blair  presented  a  little  book,  about  one-eightli  of 
an  inch  thick,  in  which  the  entire  proceedings,  as  far  as  his  road  was 
concerned,  were  contained.  If  you  turn  to  our  report,  you  will  find 
what  we  say  on  that  subject. 

Mr.  COOMBS.  Mr.  Pattison  further  reports  that  the  books  of  the  Sioux 
City  Eailroad  Company  showed  that  it  had  paid  $200,000  to  the  Fre- 
mont, Elkliorn  and  Missouri  Valley  road.  Do  you  know  how  that  is? 

Mr.  LITTLER.  I  do  not.  You  will  find  all  the  knowledge  we  had  on 
that  subject  stated  in  our  report  as  to  the  financial  condition  of  the 
road.  We  did  not  agree  with  Governor  Pattison  on  any  question  either 
of  law  or  of  fact. 

Mr.  COOMBS.  My  suggestion  is  that  the  Sioux  City  and  Pacific  Eail- 
road money  has  gone  to  the  Fremont,  Elkhorn  and  Missouri  Valley  road. 

Mr.  LITTLER.  I  do  not  know;  and  for  the  purpose  of  this  bill  I  do 
not  care. 

Mr.  COOMBS.  In  getting  at  the  value  of  the  road  it  would  be  well  to 
know  something  of  what  it  cost,  of  where  the  money  had  gone,  and 
whether  the  company  was  insolvent, 

Mr.  LITTLER.  I  do  not  think  that  the  fact  that  the  promoters  of  that 
enterprise  who  handled  the  Government  bonds  and  the  first-mortgage 
bonds  and  the  land  grant  may  have  squandered  the  money  or  may 


have  mif 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  59 


have  misapplied  it  has  anything  whatever  to  do  with  the  bill  before 
the  committee. 

Mr.  COOMBS.  Not  a  thing;  I  did  not  want  to  drift  into  that.  My 
inquiry  bears  on  the  value  of  the  road  and  its  effect  on  the  country 
which  it  was  intended  to  serve. 

Mr.  LITTLER.  Would  it  not  be  a  good  thing  for  you  to  appear  before 
the  commission  provided  for  in  the  bill  when  it  is  appointed?  That  is 
to  bo  the  very  object  of  the  commission — to  find  the  value  of  the  lien — 
and  the  Chicago  and  Northwestern  Railroad  Company  proposes  to  pay 
in  cash  the  value  of  the  lien  as  it  may  be  established  by  the  commission. 

Mr.  COOMBS.  Perhaps  so,  Mr.  Littler.  In  1878  the  Fremont,  Elk- 
horn  and  Missouri  Yalley  Company  began  an  extension  which  for  two 
years  ran  over  250  miles  of  the  Sioux  City  and  Pacific  Road.  About 
1883  it  had  some  31  locomotives  and  GOO  or  700  cars.  It  stayed  under 
lease  for  three  years,  when  it  disappeared  from  the  Sioux  City  and 
Pacific  Eoad,  and  that  was  the  first  year  that  the  Elkhorn,  Fremont 
and  Missouri  Valley  Eoad  reported  an  equipment.  It  had  then  78 
locomotives  and  2,000  cars.  What  I  am  getting  at  is  whether  Mr.  Pat- 
tisoii  was  right  in  saying  that  the  books  showed  $260,000  paid  to  the 
Fremont,  Elkhorn  and  Missouri  Valley  Railroad,  and  whether  they 
paid  $544,000  for  cars  in  1883  and  1884,  and  whether,  three  years  after- 
wards, the  cars  disappeared  from  their  list? 

Mr.  LITTLER.  I  can  not  answer  that  question.  You  will  find  all  the 
testimony  which  was  taken  by  the  Pacific  Railroad  Commission  in  seven 
volumes,  and  if  you  have  the  enterprise  to  peruse  these  volumes,  you 
will  find  all  that  was  proven  before  that  Commission,  and  you  will  find 
whether  Governor  Pattison  told  the  truth  or  whether  Mr.  Anderson  and 
myself  told  the  truth. 

Mr  COOMBS.  Is  there  anyway  by  which  I  can  find  out  whether  that 
statement  is  true? 

Mr.  LITTLER.  Allow  me  to  ask  you  in  what  capacity  you  appear  ?  Is 
it  as  amicus  curire  of  the  committee? 

The  CHAIRMAN.  Mr.  Coornbs's  object,  as  I  understand,  is  to  get  an 
amendment  to  this  Sioux  City  and  Pacific  Railroad  bill  directing  a 
communication  of  the  roads  leading  west  with  the  Sioux  City,  and 
eventually  with  the  Union  Pacific. 

Mr.  COOMBS.  You  are  right. 

Senator  WOLCOTT.  I  understand,  also,  from  his  opening  statement, 
that  he  considers  Mr.  Littler's  measure  unwise. 

Mr.  COOMBS  I  think  that  my  suggestion  will  be  that  the  only  color 
there  is  for  the  reorganization  committee  is  the  Chicago  and  North- 
western Railroad  Company,  and  that  the  Sioux  City  and  Pacific  Railroad 
and  Fremont,  Elkhorn  and  Missouri  Valley  road  are  both  absolutely 
Chicago  and  Northwestern  roads,  although  they  were  built  as  part  of 
the  Union  Pacific.  There  seems  to  have  been  a  large  amount  of  money 
and  rolling  stock  which  has  gone  over  from  the  Sioux  City  road  to  the 
Fremont,  Elkhorn  and  Missouri  Valley  road. 

Senator  FRYE.  Do  you  desire  an  amendment  to  the  bill  touching  the 
Sioux  City  road  as  well  as  the  Union  Pacific? 

Mr.  COOMBS.  No;  I  only  want  to  keep  the  whole  matter  together. 

Senator  FRYE.  You  mean  that  the  Sioux  City  proposition  is  part  of 
the  whole  proposition  ? 

Mr.  COOMBS.  Yes. 

The  CHAIRMAN.  We  have  no  evidence  of  that.  Can  you  provide  us 
with  evidence  of  it? 

Mr  COOMBS.  I  know  only  what  I  can  state  when  the  committee  will 
be  kind  enough  to  hear  me. 


60  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  FRYE.  You  want  to  be  heard  on  this  bill  as  well  as  the  other? 

Mr.  COOMBS.  I  do  not  care. 

Senator  STEWART.  Are  you  opposed  to  that  mode  of  settling  the 
matter  ? 

Mr.  COOMBS.  In  a  way,  I  am  5  the  combination  which  exists  to-day  is 
remarkable.  The  Chicago  and  Northwestern  Kailroad  is  a  large  factor 
in  a  great  combination  of  railroads.  It  reaches  half  of  the  country 
west  of  Chicago,  and  AVI  thin  its  radius  are  all  the  principal  points — 
Sioux  City,  Omaha,  Denver,  Minneapolis,  and  St.  Paul;  and  it  has  one 
branch  which  stretches  away  off  into  the  West,  within  a  hundred  miles 
of  the  new  transcontinental  line,  which  would  be  a  competitor  of  the 
Union  Pacific  system.  All  of  the  freight  of  that  vast  half  circle  of 
country  is  gathered  up  by  this  road,  and  it  is  the  interest  of  the  own- 
ers of  this  road  to  carry  this  freight  to  Chicago;  four  out  of  seven  of 
the  members  of  the  executive  committee  of  the  Chicago  and  North- 
western road  are  Vanderbilt  people.  The  Lake  Shore  road,  which 
takes  the  freight  from  Chicago  east,  is  part  of  the  same  property;  so  is 
the  New  York  Central — so  that  that  combination  controls  everything 
and  takes  all  the  freight. 

Senator  STEWART.  How  does  that  injure  the  country? 

Mr.  COOMBS.  The  Union  Pacific  and  the  Chicago  and  Northwestern 
roads,  mainly  in  combination,  have  so  arranged  that  that  country  is 
herringboned  by  fifteen  or  twenty  roads.  The  Chicago  and  North- 
western not  only  has  control  of  the  combination  I  have  indicated,  but 
has  had  for  years  a  contract  with  the  Union  Pacific,  by  which  every 
pound  of  freight  originating  at  or  destined  for  any  point  reached  by 
the  other  is  exchanged  between  them,  to  the  exclusion  of  all  other 
roads.  And  I  say  four  of  the  seven  directors  of  the  Chicago  and 
Northwestern  road  are  representatives  of  the  Yanderbilt  interest. 
They  include  two  members  of  the  reorganization  committee — Mr.  Ilughitt 
and  Mr.  Depew.  A  third  member  of  the  reorganization  is  Oliver 
Ames,  2d. 

Senator  BRICE.  What  do  you  want?  Do  you  want  part  of  the  fund 
realized  from  any  settlement  to  be  applied  to  the  completion  of  the  Sioux 
City  road  ? 

Mr.  COOMBS.  That  is  our  proposition. 

The  CHAIRMAN.  Was  there  not  a  provision  in  the  House  bill  last 
year  (the  Eiley  bill)  that  any  railway  that  would  make  a  physical  con- 
nection with  the  Union  Pacific  should  have  the  same  treatment  as  any 
other  road? 

Mr.  COOMBS.  Yes ;  there  was  such  an  item  debated  before  the  House 
committee  last  year. 

The  CHAIRMAN.  Did  not  the  House  committee  last  year  agree  to 
report  a  bill  with  that  amendment  in  it  I 

Mr.  COOMBS.  Yes;  and  in  three  days  afterwards  there  was  a  memo- 
rial received  from  the  Union  Pacific  people  saying  that  they  would  not 
accept  a  bill  with  such  unusual  restrictions  in  it. 

The  CHAIRMAN.  But  still,  the  committee  did  report  a  bill  with  that 
amendment? 

Mr.  COOMBS.  Yes,  the  Eiley  bill  was  reported;  but  its  report  was 
immediately  followed  by  a  notification  from  the  Union  Pacific  Company 
that  it  would  not  accept  a  bill  with  such  unusual  restrictions  in  it. 

Senator  WOLCOTT.  Will  any  bill  containing  that  restriction  answer 
your  object? 

Mr.  COOMBS.  I  think  it  is  of  consequence  that  in  any  settlement  with 
the  Chicago  and  Northwestern  the  Sioux  City  and  Pacific  should  be 


GOVERNMENT    DEBT    OF    THE    PACIFIC   RAILROADS.  61 


taken  into  account,  and  that  as  much  relief  as  possible  from  that  source 
will  be  turned  to  it.  I  am  making  these  disconnected  statements  so 
that  it  shall  not  be  said  that  I  sat  still  and  listened  to  the  figures  of 
Mr.  Littler  which  I  should  have  questioned  at  the  time.  If  I  may  also 
refer  to  Governor  Pattison's  minority  report,  it  was  said  in  it  that  Mr. 
Blair  offered  a  million  of  dollars  over  and  above  the  first-mortgage  lien. 
(To  Mr.  Littler:)  Do  you  know  whether  that  was  so? 

Mr.  LITTLER.  If  it  was  so,  you  will  find  it  in  Mr.  Blair's  testimony, 
taken  by  the  United  States  Pacific  Railroad  Commission.  That  testi- 
mony is  contained  in  seven  volumes,  and  every  volume  is  indexed;  so, 
you  can  find  it 

Mr.  COOMBS.  There  appears  from  1885  to  the  present  time,  in  Poor's 
Manual,  apparently,  a  payment  of  Government  interest  on  the  Sioux 
City  subsidy  bonds  by  the  Chicago  and  Northwestern  road,  and  there 
is  a  deficit  account  amounting  to  $1,600,000.  Are  you  sufficiently 
familiar  with  the  finances  of  the  company  to  know  whether  that  is  so? 

Mr.  LITTLES.  No,  sir.  You  will  find  the  accounts  of  that  company 
with  the  United  States  Government  approved  by  the  actuary  of  the 
Treasury,  who  stated  the  accounts  on  correct  principles,  and  you  will 
find  exactly  the  amount  due  on  all  accounts  whatever  up  to  the  day  of 
that  statement. 

Mr.  COOMBS/  Do  you  know  whether  the  Sioux  City  and  Pacific  Rail- 
road did  build  the  bridge  across  the  Missouri  ? 

Mr.  LITTLER.  I  know  that  it  did  not  build  it  as  a  corporation.  It 
may  be  that  some  of  its  stock  or  bonds  went  to  build  it.  The  Chicago 
and  Northwestern  and  other  roads  did  build  it. 

Mr.  COOMBS.  Is  the  Sioux  City  and  Pacific  Railroad  still  paying 
dividends  on  its  preferred  stock  ? 

Mr.  LITTLER.  I  think  that  very  likely,  it  is;  but  these  are  all  matters 
which  our  report  shows. 

Mr.  COOMBS.  The  last  number  of  Poor's  Manual  shows  $350,000 
belonging  to  this  road  in  the  hands  of  the  Government. 

Mr.  LITTLER.  I  can  not  state  from  memory  whether  it  is  right  or 
not.  I  have  not  had  occasion  to  refer  to  that  subject  since  1887  until  I 
was  retained  as  counsel  by  the  Chicago  and  Northwestern  Railroad 
Company  to  prepare  this  bill. 

Senator  FRYE.  Does  the  Union  Pacific  Railroad  Company  desire  to 
be  heard  any  further  before  the  committee  in  regard  to  its  proposition? 

Mr.  PIERCE.  Yes,  sir;  and  to  submit  the  draft  of  a  bill. 

The  CHAIRMAN.  And  when  will  you  submit  it? 

Mr.  PIERCE.  I  should  like  to  be  heard  in  the  latter  part  of  next 
week,  if  convenient  to  the  committee. 

The  committee  adjourned  until  Friday,  February  14,  at  10  a.  in. 


WASHINGTON,  D.  C.,  February  14, 1896. 
The  committee  met  at  10.30  a.  m. 

Present:  Senators  Gear  (chairman),  Stewart,  Wolcott,  Frye,  Brice, 
and  Morgan. 

THE  UNION  PACIFIC. 

STATEMENT  OF  MR.  WINSLOW  S.  PIERCE— Continued. 

Mr.  Pierce  said : 

Mr.  CHAIRMAN  AND  GENTLEMEN  OF  THE  COMMITTEE:  Since  the 
last  session  of  the  committee  at  which  I  was  present,  and  in  the  light 


62  GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

of  the  experience  of  that  session,  I  became  very  strongly  impressed 
witli  the  conviction  that  it  would  be  a  most  difficult,  if  not  an  impracti- 
cable, task  for  the  committee  to  take  such  testimony  and  to  make  such 
inquiry  and  investigation  as  would  give  to  it  all  the  data  that  it  would 
require  in  order  to  form,  or  to  accept  the  form  of,  a  funding  bill  or  of 
a  fixed  sum  bill;  and  I  have  therefore  prepared  for  submission  to  the 
committee  a  bill  providing  for  the  creation  of  a  commission.  I  think 
that  it  will  at  least  have  the  merit  of  being  suggestive  to  the  commit- 
tee and  of  affording  a  basis  for  discussion  and  consideration. 
This  bill  provides  for — 

(1)  Appointment  by  the  President,  subject  to  approval  of  the  Senate, 
of  a  commission  of  three  members  to  investigate,  determine,  and  report 
to  the  President  the  fair  cash  value  of  the  claim  and  lien  of  the  United 
States. 

(2)  Authority  to  the  commissioners  to  subposnaand  examine  witnesses, 
to  have  process  of  courts,  to  appoint  a  secretary;  fixes  compensation 
of  commissioners  and  secretary  and  makes  maximum  appropriation 
$50,000. 

(3)  Report  of  commissioners  or  a  majority,  subject  to  approval  of 
President,  to  be  conclusive  as  to  sum  which,  together  with  the  amounts 
appropriated  for  commissioners'  expenses,  etc.,  may  be  paid  for  claim 
and  lien  of  the  United  States ;  the  Secretary  of  the  Treasury  upon  such 
payment  to  execute  instrument  of  assignment  of  lien  and  claim,  reserv- 
ing sinking  fund. 

(4)  Authority  to  purchasers  to  organize  new.  company,  empowered  to 
acquire  and  operate  the  lines  and  property  of  the  Union  Pacific  Bail- 
way  Company,  with  such  corporate  powers  as  are  necessarily  involved. 

(5)  Repeal  of  provisions  of  prior  acts  which  would  be  inapplicable 
to  the  reorganized  company  under  the  new  conditions,  but  reserving 
the  Government's  preference  right  to  transportation  of  mails,  troops, 
munitions  of  war,  etc. 

(6)  Authority  and  direction  to  the  Attorney-General,  in  default  of 
payment  of  amount  fixed  by  commission,  to  foreclose  the  lien  of  the 
Government,  and  upon  sale  to  bid  the  amount  of  the  indebtedness  to 
the  United  States. 

(7)  Reservation  of  remedies  to  the  United  States  and  of  power  to 
alter,  amend,  or  repeal. 

Senator  MORGAN.  Is  there  a  provision  in  that  bill  for  the  commission 
to  make  a  contract  with  the  purchasers  of  the  road? 

Mr.  PIERCE.  The  third  provision  of  the  bill  is  the  one  to  which  that 
inquiry  is  addressed.  It  provides  that  the  report  of  the  commission 
shall  be  conclusive  as  to  the  sum  to  be  paid,  subject,  however,  to  the 
approval  of  the  President.  It  provides  the  time  within  which  the  com- 
mission shall  report,  and  the  time  within  which,  after  that  report,  the 
sum  found  by  it  shall  be  paid. 

Senator  MORGAN.  It  does  not  provide  for  the  negotiation  of  contract 
between  the  purchaser  and  the  Government?  It  merely  provides  a  sum 
to  be  paid. 

Mr.  PIERCE.  A  sum  to  be  paid ;  and  the  purchasers  or  their  assignees 
or  nominees  are  to  organize  as  a  corporation  for  the  purpose  of  acquiring 
the  Union  Pacific. 

Senator  MORGAN.  That  is,  the  purchaser  under  foreclosure  ? 

Mr.  PIERCE.  The  purchasers  of  the  claim  of  the  Government.  The 
reorganization  committee  will  go  on  and  foreclose  on  the  property  under 
their  own  mortgage. 

Senator  MORGAN.  Your  bill  is  on  the  line  of  Senator  Thurston's  bill? 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  63 

Mr.  PIERCE.  Not  entirely.  I  think  there  are  some  elements  of  simil- 
itude between  them.  This  bill  provides  for  the  establishment  of  a 
commission  to  do  these  things. 

Senator  STEWART.  It  provides  for  the  sale  of  liens  without  fore- 
closure, subrogating  the  purchaser  to  all  the  rights  of  the  Government. 

Mr.  PIERCE.  Precisely. 

Senator  STEWART.  Does  it  provide  for  immediate  payment  in  cash? 

Mr.  PIERCE.  It  provides  that  the  commission  shall  report  on  or 
before  July  1, 1896,  and  that  the  amount  fixed  by  the  commission  shall 
be  paid  on  or  before  January  1,  1897. 

Senator  MORGAN.  Is  there  any  reason  why  that  arrangement  should 
not  extend  so  as  to  include  both  roads  I 

Mr.  PIERCE.  I  think  not.  Some  provisions  of  the  bill  may  be  pecu- 
liarly applicable  to  the  Union  Pacific,  on  account  of  reorganization,  but 
I  have  no  doubt  that  the  provisions  of  the  bill  can  be  adapted  so  as  to 
cover  the  Central  Pacific. 

Senator  MORGAN.  So  that  one  commission  should  take  charge  of  the 
whole  subject. 

Mr.  PIERCE.  Yes,  sir. 

The  CHAIRMAN.  Do  the  parties  whom  you  represent  object  to  the 
joint  arrangement  ? 

Mr.  PIERCE.  Not  if  the  general  provisions  of  the  bill  can  apply  to 
both  roads ;  but  it  appears  almost  impracticable  to  deal  with  the  two 
properties  in  a  single  measure.  This  bill,  if  it  should  meet  the  approval 
of  the  committee,  would  eliminate  the  necessity  for  prolonged  discus- 
sion here,  and  for  the  inquiry,  the  preliminary  steps  of  which  were 
taken  at  the  early  session  of  the  committee.  I  have  with  me  a  number 
of  copies  of  the  proposed  bill,  and  I  will  hand  them  to  the  chairman 
and  the  members  of  the  committee. 

Senator  MORGAN.  From  whom  does  that  proposition  come  which  you 
submit  ? 

Mr.  PIERCE.  It  is  suggested  by  us  on  behalf  of  the  reorganization 
committee,  but  rather  as  a  proposition  and  basis  of  discussion  than  as 
a  complete  measure. 

Senator  MORGAN.  It  is  something  to  which  the  reorganization  com- 
mittee gives  its  assent  and  its  preference,  beyond  any  measure  which 
we  may  attempt  to  enact  here  for  the  sale  of  this  road  or  the  funding 
of  its  debt  on  the  basis  that  you  argued  the  other  day,  It  is  a  substi- 
tute for  that. 

Mr.  PIERCE.  I  can  not  say  that  the  reorganization  committee  would 
give  its  preference  to  this  bill  over  that.  The  difficulty  in  the  way  of 
reaching  conclusions  in  legislation  of  this  character  is  so  great  that 
we  supposed  that  this  might  probably  be  the  best  way  of  reaching  a 
conclusion,  arid  for  that  reason  we  suggest  it. 

Senator  FRYE.  Is  there  anything  in  this  bill  which  binds,  or  can  you 
provide  a  bill  which  will  bind  the  reorganization  committee  to  accept 
and  pay  whatever  the  commission  reports'? 

Mr.  PIERCE.  We  can  include  a  provision  binding  the  reorganization 
committee  to  do  this;  but  I  do  not  think  that  a  provision  of  that  kind 
would  be  acceptable.  The  commission  might  fix  seventy  millions  as  the 
value  of  the  Government  lieu,  or  some  other  exaggerated  sum;  but,  of 
course,  it  is  not  to  be  supposed  that  it  would  do  that. 

Senator  FRYE.  Your  proposition  simply  allows  tbe  commission  to  be 
appointed,  and  to  go  on  and  ascertain  the  probable  value  of  this 
indebtedness  of  the  Union  Pacific  to  the  Government? 

Mr,  PIERCE,  Yes, 


64  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  FRYE.  And  to  report  their  finding  to  the  President.' 

Mr.  PIERCE.  Yes. 

Senator  FRYE.  And  if  the  President  approves,  that  shall  be  found  to 
be  the  value  of  the  indebtedness? 

Mr.  PIERCE.  Yes. 

Senator  FRYE.  But  it  does  not,  and  it  can  not,  by  law,  make  any 
provision  by  which  the  people  whom  you  represent  shall  accept  the 
judgment  of  the  commission  and  pay  the  money. 

Mr.  PIERCE.  No ;  but  the  company  which  I  represent,  holding  75  per 
cent  of  the  bonded  indebtedness  of  the  Union  Pacific  and  90  per  cent 
of  the  capital  stock  of  the  company,  is  in  a  better  condition  to  bid  for 
the  property  or  to  accept  the  conclusions  of  the  commission  than  any 
other  interest  would  be  in.  Therefore,  there  is  a  reasonable  probability 
that  the  finding  of  the  commission  (which  we  assume  will  be  just)  will 
be  accepted  by  the  reorganization  committee;  but  if  the  reorganization 
committee  does  not  accept  it  it  will  retire  from  the  matter  and  the  Gov- 
ernment will  go  on  and  exercise  its  rights  to  the  extreme,  no  doubt. 
That  is  the  theory  of  the  bill. 

Senator  MORGAN.  I  was  not  here  the  first  day  that  you  made  your 
statement  to  the  committee.  Have  you  given  anywhere  the  list  of 
names  of  the  gentlemen  who  comprise  this  reorganization  committee? 

Mr.  PIERCE.  Yes ;  the  names  appear  on  the  pamphlet  of  the  reorgani- 
zation plan,  which  I  have  already  submitted.  I  will  see  that  you  are 
furnished  with  one. 

Senator  MORGAN.  Please  do  so;  I  have  not  seen  it. 

The  CHAIRMAN.  What  percentage  of  the  securities  of  the  Union 
Pacific  interest  does  your  reorganization  committee  represent1? 

Mr.  PIERCE.  Our  reorganization  committee  represents  very  nearly  75 
per  cent  of  all  the  bonds,  and  I  should  say  90  per  cent  of  the  stock. 
That  is  their  actual  deposit  with  the  committee. 

The  CHAIRMAN.  Then  25  per  cent  of  the  securities  and  10  per  cent  of 
the  stock  do  not  give  their  assent  to  the  method  proposed  by  the  reor- 
ganization committee  ? 

Mr.  PIERCE.  They  have  not  yet  deposited  their  securities. 

The  CHAIRMAN.  Do  not  some  of  them  seriously  object  to  the  reor- 
ganization plan  ? 

Mr.  PIERCE.  I  know  of  no  objections  to  the  reorganization  plan,  ex- 
cept one,  and  that  is  indicated  by  a  circular  signed  by  a  man  named 
Kogers.  What  his  relations  are  to  the  security  holders  1  am  not  able 
to  state. 

The  CHAIRMAN.  Does  he  not  claim  to  represent  five  or  six  millions'? 

Mr.  PIERCE.  I  have  seen  a  statement  in  the  newspapers  of  there 
being  such  a  claim,  but  I  do  not  understand  that  any  securities  have 
been  deposited  with  him. 

Senator  MORGAN.  Do  you  know  what  proportion  of  these  gentlemen 
who  compose  the  reorganization  committee  are  nonresidents  or  aliens? 

Mr.  PIERCE.  I  do  not  think  that  any  are  nonresidents  or  aliens. 

Senator  MORGAN.  They  are  all  Americans? 

Mr.  PIERCE.  So  far  as  I  know.  I  am  quite  certain  as  to  all  except 
one.  There  are  no  aliens  among  them.  However,  the  committee  itself 
would  not  necessarily  be  the  purchaser  of  the  road,  but  would  consti- 
tute a  new  committee. 

The  CHAIRMAN.  Do  I  understand  you  to  mean  that  the  owners  of 
the  securities  are  not  aliens  or  nonresidents? 

Mr.  PIERCE.  I  can  not  tell  about  that.  I  know  that  a  good  many  of 
those  securities  came  from  abroad. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  65 


Senator  MORGAN.  I  put  that  question  only  for  this  reason:  It  might 
very  naturally  be  expected,  if  control  of  the  road  should  pass  into  the 
hands  of  foreigners,  that  complications  would  arise  between  us  and 
them,  and  foreign  Governments  might  be  expected  to  see  that  the  rights 
of  their  subjects  were  not  frittered  away  or  improperly  interfered  with. 
That  is  my  reason  for  putting  the  question.  I  want  to  get  the  whole 
subject  before  the  committee. 

Mr.  Pierce  presented  the  bill  submitted  by  him.     It  is  as  follows : 

A  BILL  to  amend  an  act  entitled  "An  act  to  aid  in  the  construction  of  a  railroad  arid  telegraph  line 
from  the  Missouri  River  to  the  Pacific  Ocean,  and  to  secure  to  the  Government  the  use  of  the  same 
for  postal,  military,  and  other  purposes,"  approved  July  first,  eighteen  hundred  and  sixty-two;  also 
to  amend  an  act  approved  July  second,  eighteen  hundred  and  sixty-four;  and  also  an  act  approved 
May  seventh,  eighteen  hundred  and  seventy-eight,  both  in  amendment  of  said  first-mentioned  act, 
and  other  acts  amendatory  thereof  and  supplemental  thereto;  and  to  provide  for  the  settlement  of 
claims  growing  out  of  the  issue  of  bonds  to  aid  in  the  construction  of  certain  of  the  railroads,  and 
to  secure  the  settlement  of  all  indebtedness  to  the  United  States  of  certain  companies  therein  men- 
tioned. 

Whereas  the  subsidy  bonds  issued  by  the  United  States  in  aid  of  the  construction 
of  the  railroad  of  the  Union  Pacific  Railroad  Company  were,  pursuant  to  the  acts 
of  Congress  of  the  United  States  approved  July  first,  eighteen  hundred  and  sixty-two, 
and  July  second,  eighteen  hundred  and  sixty- four,  issued  to  the  amount  of  twenty- 
seven  million  two  hundred  and  thirty-six  thousand  five  hundred  and  twelve  dollars, 
and  the  subsidy  bonds  of  the  United  States  issued  in  aid  of  the  construction  of  the  rail- 
road of  the  Kausas  Pacific  Railway  Company  (originally  incorporated  under  the  name 
of  the  Leaven  worth,  Pawnee  and  Western  Railroad  Company)  were  issued  pursuant 
to  the  provisions  of  the  said  last-mentioned  acts  to  the  amount  of  six  million  three 
hundred  and  three  thousand  dollars,  and  the  amount  of  said  subsidy  bonds  and  inter- 
est thereon,  subject  to  deductions  by  reason  of  interest  payments  and  credits  and 
the  due  application  of  the  sinking  fund  created  and  existing  under  the  act  of  Con- 
gress of  May  seventh,  eighteen  hundred  and  seventy-eight,  constitute,  pursuant  to  the 
provisions  of  said  acts,  an  indebtedness  of  the  said  companies,  respectively,  and  of 
the  Union  Pacific  Railway  Company,  successor  by  consolidation  to  said  companies, 
to  the  United  States,  which  indebtedness  is  secured  by  lien  upon  certain  portions  of 
the  railroad  lines  of  said  companies  as  in  said  acts  provided ;  and 

Whereas  all  the  lines  of  railway  and  railroad  property  of  the  Union  Pacific  Rail- 
way Company  are  in  the  hands  of  receivers  appointed  by  the  circuit  court  of  the 
United  States  for  the  eighth  circuit  in  proceedings  now  pending  therein,  and  the 
Union  Pacific  Railwray  Company  is  in  default  in  the  payment  of  two  million  three 
hundred  and  ninety  thousand  one  hundred  dollars  of  interest  upon  the  first-mort- 
gage bonds  covering  those  parts  of  its  railroad-  upon  which  the  indebtedness  to  the 
United  States  on  account  of  said  subsidy  bonds  is  a  lieu,  and  also  in  default  in  the 
payment  of  eight  million  seven  hundred  and  fifteen  thousand  dollars  of  the  princi- 
pal of  said  first-mortgage  bonds,  and  bills  of  complaint  have  been  filed  for  the  fore- 
closure of  the  mortgages  securing  the  said  bonds;  and 

Whereas  the  public  interest  requires  the  enactment  of  legislation  having  for  its 
object  the  complete  settlement  of  the  indebtedness  of  the  Union  Pacific  Railway  Com- 
pany to  the  United  States,  and,  in  the  alternative,  the  protection  and  enforcement  of 
the  lien  of  the  United  States  securing  the  said  indebtedness : 

Be  it  enacted  ~by  the  Senate  and  House  of  Representatives  of  the  United  States  of  America 
in  Congress  assembled,  That  three  commissioners  be  appointed  by  the  President  of 
the  United  States,  subject  to  the  approval  of  the  Senate  (not  more  than  two  of  said 
commissioners  to  be  members  of  the  same  political  party),  to  investigate  and  deter- 
mine and  to  report  to  the  President  of  the  United  States  the  fair  cash  value  of  the 
claim  and  lien  of  the  United  States  in  respect  of  the  indebtedness  owing  to  the  United 
States  by  the  Union  Pacific  Railroad  Company,  the  Kansas  Pacific  Railway  Company, 
and  the  successor*  company,  the  Union  Pacific  Railway  Company,  on  account  of  the 
subsidy  bonds  issued  by  the  United  States  in  aid  of  the  construction  of  the  railway 
or  parts  of  the  railway  lines  of  the  said  companies,  the  said  United  States  reserving 
and  keeping  all  moneys  and  securities  and  accumulations  in  the  United  States  sink- 
ing fund  applicable  to  said  companies. 

SEC.  2.  That  said  commissioners  shall  have  power  to  take  testimony,  to  subpoena 
and  examine  witnesses,  and  to  send  for  persons  and  papers ;  and  it  is  hereby  made 
the  duty  of  the  circuit  courts  of  the  United  States  for  the  several  districts  in  which 
said  commissioners  may  be  sitting  as  a  commission,  on  request  of  said  commis- 
sioners, or  any  one  of  them,  to  issue  subpoenas  or  other  process  to  the  United  States 
marshal  of  the  proper  district,  by  him  to  be  executed,  requiring  the  attendance  of 
witnesses  before  said  commissioners.  Said  commissioners  shall  have  power  to 
appoint  a  secretary  with  compensation  not  to  exceed  the  sum  of  ten  dollars  per 

P  R 5 


66  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

day  ;  and  said  commissioners  shall  each  receive  ;is  compensation  lor  his  services  the 
sum  of  live  thousand  dollars,  together  with  their  necessary  expenses,  which  said 
expenses  shall  be  itemized  and  the  report  thereof,  verified  by  affidavit,  submitted  to 
the  Secretary  of  the  Treasury;  and  the  sum  of  fifty  thousand  dollars,  or  so  much 
thereof  as  may  be  necessary,  is  hereby  appropriated  to  cover  the  compensation, 
expenses,  and  disbursements  of  said  commissioners,  to  be  paid  out  of  any  money  in 
the  Treasury  not  otherwise  appropriated,  upon  vouchers  approved  by  one  or  more 
of  said  commissioners.  Said  commissioners  shall  make  report  to  the  President  of 
the  United  States  on  or  before  the  first  Monday  of  August,  eighteen  hundred  and 
ninety-six. 

SEC.  3.  That  the  report  of  the  said  commissioners  or  a  majority  of  them  shall, 
subject  to  the  approval  of  the  President  of  the  United  States,  be  a  conclusive  find- 
ing and  ascertainment  of  the  amount  which,  together  with  the  amount  (not  to  exceed 
fifty  thousand  dollars)  of  the  compensation,  expenses,  and  disbursements  of  said 
commission,  the  said  Union  Pacific  Railway  Company,  or  any  reorganization  com- 
mittee thereof  which  shall  hold  a  majority  of  the  outstanding  mortgage  bonds  and 
stock  of  the  said  railway  company,  shall  be  at  liberty  to  pay,  on  or  before  January 
first,  eighteen  hundred  and  ninety-seven,  in  discharge  and  satisfaction  or  in  pur- 
chase of  the  indebtedness,  right,  claim,  interest,  demand,  and  lien  of  the  United 
States  against  the  said  Union  Pacific  Railroad  Company,  the  said  Kansas  Pacific 
Railway  Company,  and  the  Union  Pacific  Railway  Company;  and  upon  the  pay- 
ment, on  or  before  the  date  last  mentioned,  by  said  Union  Pacific  Railway  Com- 
pany, or  by  such  reorganization  committee,  of  said  sum  so  found  and  ascertained  by 
said  commissioners,  or  a  majority  of  them,  and  approved  by  the  President  of  the 
United  States,  and  of  the  said  further  sum  (not  to  exceed  fifty  thousand  dollars)  of 
the  compensation,  expenses,  and  disbursements  of  said  commission,  to  the  Secretary 
of  the  Treasury  of  the  United  States,  the  said  Secretary  of  the  Treasury  is  hereby 
authorized  and  directed  to  accept  such  sum  and  to  cover  the  same  into  the  Treasury 
of  the  United  States,  and  thereupon,  by  instrument  executed  by  him  in  behalf  of  the 
United  States,  to  satisfy  and  discharge,  or,  in  the  event  of  the  payment  being  made 
by  such  reorganization  committee,  or  by  their  agents  or  trustees,  to  transfer,  assign, 
convey,  and  release  to  the  parties  making  such  payment,  and  their  assigns,  all  the 
indebtedness,  right,  claim,  interest,  and  demand  of  the  United  States  against  the 
Union  Pacific  Railroad  Company,  the  Kansas  Pacific  Railway  Company,  and  the  Union 
Pacific  Railway  Company,  together  with  the  lien,  charge,  mortgage,  and  rights  of 
the  United  States  on  or  in  respect  to  the  railroad  and  property  of  the  said  companies 
and  the  revenues  thereof,  but  without  recourse  to  the  United  States  in  any  event; 
in  either  case,  however,  reserving  and  excepting  all  rights  of  the  United  States  in 
the  sinking  fund  established  under  said  act  of  Congress  of  May  seventh,  eighteen 
hundred  and  seventy-eight,  and  in  the  securities  therein  held,  and  in  the  accumula- 
tions thereof;  and  such  conveyance  and  assignment  so  made  shall  operate  to  transier 
to  and  vest  in  the  persons  making  such  payment  and  purchase,  and  in  their  assigns, 
all  rights,  claims,  and  demands  of  the  United  States  in  and  to  said  indebtedness,  and 
in  and  to  the  lien  and  right  of  enforcement  of  the  lieu  securing  the  same. 

SEC.  4.  That  in  the  event  that  said  indebtedness,  claim,  demand,  and  lien  of  the 
United'  States  shall  be  so  purchased  by  such  reorganization  committee  as  and  in 
the  manner  hereinbefore  provided,  or  for  and  in  behalf  of  sucli  committee  by  their 
trustees  or  agents,  the  members  of  such,  committee  or  their  assigns,  together  with 
their  associates,  not  in  all  to  exceed  fifteen  persons,  shall  be,  and  they  are  hereby 
created  and  erected  into  a  body  corporate  and  politic  in  deed  and  in  law,  and  they 
and  their  successors,  by  and  in  the  name  of  The  Pacific  Railway  Company,  shall  have 
perpetual  succession,  and  shall  be  able  to  sue  and  be  sued,  plead  and  be  impleaded, 
defend  and  be  defended,  in  all  courts  of  law  and  equity  within  the  United  States, 
and  may  make  and  have  a  common  seal ;  and  the  said  corporation  shall  have,  possess, 
and  exercise  all  the  rights,  powers,  privileges,  advantages,  and  franchises  conferred 
upon  the  Union  Pacific  Railroad  Company,  the  Kansas  Pacific  Railway  Company,  the 
Denver  Pacific  Railway  and  Telegraph  Company,  and  the  Union  Pacific  Railway 
Company,  under  the  several  acts  of  the  Congress  of  the  United  States  of  which  this 
act  is  amendatory,  and  all  the  rights,  powers  and  privileges,  advantages  and  fran- 
chises conferred  upon  railway  corporations  in  the  several  States  through  which  the 
railroad  property  of  the  said  corporation  hereby  created  shall  extend  and  be  operated, 
and  said  company  shall  also  have  power  and  lawful  authority  to  construct,  purchase, 
lease,  or  acquire,  by  consolidation  or  otherwise,  branches  and  extensions  not  incon- 
sistent with  the  general  laws  of  the  State  or  States  in  which  such  branches  and  exten- 
sions shall  be  located  or  situated,  including  the  power  to  construct  or  acquire,  by 
purchase,  lease,  consolidation,  or  otherwise,  such  railroads  as  will  enable  it  to  reach 
Pacific  Coast  places  or  points :  Provided,  however,  That  no  such  purchase,  lease,  or  con- 
solidation shall  be  made  of  or  with  any  competing  through  lines  of  railroad  extending 
from  the  Mississippi  or  Missouri  River  to  the  Pacific  Ocean ;  and  shall  have  power  to 
become  entitled  to  possess,  enjoy,  operate,  and  dispose  of  all  the  railway  lines,  rolling 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS,  67 


and  for  the  purposes  of  acquiring  the  railroad  and  property  of  which  said  Pacific 


Railway  Company  is  herein  authorized  to  become  possessed,  and  for  lawful  corporate 
purposes,  shall  have  power  to  make,  issue,  and  negotiate  its  corporate  bonds  for  an 
amount  not  exceeding  at  any  time  in  the  aggregate  the  present  funded  indebtedness 
(including  the  principal  and  interest  of  the  said  debt  to  the  United  States)  of  the 
said  Union  Pacific  Railway  Company  and  its  said  constituent  companies,  the  Union 
Pacific  Railroad  Company,  the  Kansas  Pacific  Railway  Company,  and  the  Denver 
Pacific  Railway  and  Telegraph  Company,  and  to  secure  the  same  by  mortgage  or 
mortgages  upon  its  railroad  property  and  assets,  and  for  like  purposes  to  issue  its 
capital  stock,  classified  into  preferred  and  common  shares  as  it  may  determine,  to  an 
amount  in  the  aggregate  not  exceeding  the  bonded  indebtedness  hereby  authorized 
to  be  issued  by  the  said  Pacific  Railway  Company :  Provided,  however,  That  said  com- 
pany shall  have  the  power  to  issue  further  bonds  and  stock  for  future  construction 
and  acquisition  of  railroads  and  property  beyond  that  now  owned  by  the  Union 
Pacific  Railway  Company,  but  only  to  the  amount  of  the  cost  of  such  future  con- 
structed or  acquired  railroads  and  property;  that  the  purchasers  of  the  said  indebt- 
edness to  the  United  States  or  their  assigns  and  their  associates  shall  meet  at  the  city 
of  Omaha,  in  the  State  of  Nebraska,  within  sixty  days  after  the  execution  and  deliv- 
ery of  the  said  instrument  of  transfer,  assignment,  conveyance,  and  release  herein- 
before provided  to  bo  executed  and  delivered  by  the  Secretary  of  the  Treasury  of  the 
United  States  in  section  third  hereof,  and  shall  then  and  there  proceed  to  perfect 
the  corporate  organization  of  the  said  Pacific  Railway  Company  as  nearly  as  may  be 
in  accordance  with  the  manner  provided  for  the  complete  organization  of  the  Union 
Pacific  Railroad  Company  by  the  provisions  of  the  said  act  of  Congress  of  July  first, 
eighteen  hundred  and  sixty-two. 

SEC.  5.  That  all  provisions  of  any  acts  of  Congress  hereinbefore  recited,  and  of 
acts  amendatory  thereof,  relating  to  the  appointment  of  Government  directors,  to 
the  collection  of  any  percentage  of  net  earnings,  and  to  the  withholding  or  applica- 
tion of  any  moneys  due  or  to  become  due  from  the  United  States  for  any  services 
rendered  by  the  tlnion  Pacific  Railway  Company  or  either  of  its  said  constituent 
companies  to  the  United  States,  shall  be  and  be  deemed  inapplicable  to  the  said 


>P( 

forbidding  or  restricting  the  mortgaging  or  pledging  of  property  are,  as  to  the  said 
Pacific  Railway  Company,  repealed ;  and  said  company  shall  have  and  possess  all  the 
usual  powers  of  borrowing  money  on  its  credit,  or  on  the  security  of  any  of  its  prop- 
erty or  assets,  and  of  constructing  or  extending  its  railway,  and  of  acquiring  for  such 
purposes  title  to  land  by  condemnation  proceedings,  and  such  other  powers  as  are  or 
may  be  granted  to  and  exercised  by  railway  corporations  in  the  respective  States  in 
which  its  said  railway  is  or  may  be  situated:  Provided,  however,  That  the  grants 
aforesaid  are  made  upon  condition  that  said  Pacific  Railway  Company  shall  keep  its 
railroad  in  repair  and  use,  and  shall  at  all  times  transport  mails,  tro'ops,  and  muni- 
tions of  war,  supplies  and  public  stores  upon  said  railway  for  the  Government  when- 
ever required  to  do  so,  by  any  Department  thereof;  and  that  the  Government  shall 
at  all  times  have  preference  in  the  use  of  the  same  for  all  the  purposes  aforesaid  at 
fair  and  reasonable  rates  of  compensation,  not  to  exceed  the  amounts  paid  by  private 
parties  for  the  same  kind  of  service. 

SEC.  6.  That,  in  the  event  of  the  failure  of  the  Union  Pacific  Railway  Company 
or  of  any  such  reorganization  committee  to  pay,  as  in  the  manner  and  within  the 
time  hereinbefore  specified,  the  amount  found  and  ascertained  by  the  said  commis- 
sioners appointed  by  this  act,  and  approved  by  the  President,  together  with  the 
further  sum  (not  exceeding  fifty  thousand  dollars)  of  the  compensation,  expenses,  and 
disbursements  of  said  commissioners,  the  Attorney-General  of  the  United  States  shall 
be,  and  ho  is  hereby,  authorized  and  directed  to  enforce,  by  appropriate  legal  pro- 
ceedings to  be  instituted  and  prosecuted  in  the  circuit  court  of  the  United  States  for 
the  district  of  Nebraska,  which  court  shall  have  jurisdiction  in  the  premises  both  at 
law  and  in  equity,  or  in  any  other  court  or  courts  of  competent  jurisdiction,  the  said 
claim  and  lien  of  the  United  States,  and  in  such  proceedings  to  take  such  action  as 
may  be  appropriate  for  the  protection  of  the  interests  of  the  United  States,  and  for 
the  foreclosure  of  its  lien  by  sale  or  otherwise.  Upon  such  proceedings  the  property 
embraced  within  the  lieu  of  the  United  States  shall  bo  sold  to  the  highest  bidder, 
subject  to  any  prior  lien  or  encumbrance  thereon,  and  for  a  sum  not  less  than  the 
amount  so  lixed  and  determined  by  said  commissioners  or  a  majority  of  them;  and  at 


68  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

such  sale  the  Attorney-General  of  the  Tinted  States,  if  in  his  judgment  the  interests 
of  the  United  States  so  require,  may  bid  the  amount  of  said  debt  to  the  United  States 
including  interest. 

SEC.  That  this  act,  and  each  and  every  provision  thereof,  shall  severally  and 
respectively  he  deemed,  taken,  and  held  as  in  alteration  and  amendment  of  said  act 
of  eighteen  hundred  and  sixty-two  and  of  said  act  of  eighteen  hundred  and  sixty- 
four,  and  of  said  act  of  eighteen  hundred  and  seventy-eight  respectively,  and  of 
the  other  acts  amendatory  thereof  and  supplemental  thereto,  and  of  all  of  said  acts 
so  far  as  they  are  inconsistent  with  this  act;  nor  shall  anything  in  this  act  bo  con- 
strued or  taken  in  any  wise  to  aft'ect  or  impair  the  right  of  Congress  at  any  time 
hereafter  further  to  alter,  amend,  or  repeal  the  said  acts  hereinbefore  mentioned ; 
and  this  act  shall  be  subject  to  alteration,  amendment,  or  repeal,  as  in  the  opinion  of 
Congress  justice  or  the  public  welfare  may  require;  and  nothing  herein  contained 
shall  be  held  to  deny,  exclude,  or  impair  any  right  or  remedy  in  the  premises  now 
existing  in  favor  of  the  United  States.  This  act  shall  be  published  and  printed  as 
a  public  act,  and  in  all  proceedings  may  be  cited  as  such. 

SIOUX    CITY    AND    PACIFIC. 

STATEMENT  OF  MR,  COOMBS. 

Mr.  Coombs  said  : 

Mr.  CHAIRMAN  AND  GENTLEMEN  OF  THE  COMMITTEE:  I  appear, 
as  perhaps  most  of  you  know,  in  behalf  of  the  Credits  Commutation 
Company,  whose  counsel  I  am.  It  is  an  organization  composed  of 
three  or  four  hundred  State,  national,  and  city  banks  of  twenty-two 
States,  whose  interests  are  located  at  Sioux  City,  and  who  are  repre- 
sentatives of  several  larger  interests,  who  think  that  their  interests 
will  be  vitally  affected  by  the  disposition  which  you  may  make  of  the 
interest  of  the  Government  in  these  railroad  properties. 

Senator  MORGAN.  Point  out  on  the  map  the  line  of  road  you  refer  to. 

Mr.  COOMBS.  I  have  mentioned  no  road  as  yet  5  I  am  about  to  do  so. 
Before  coming  directly  to  that,  I  would  like  to  make  a  few  preliminary 
remarks.  In  undertaking  to  ask  some  questions  of  Mr.  Littler  the  other 
day  I  precipitated  an  avalanche  of  interrogatories  upon  myself,  and  in 
endeavoring  to  answer  them  I  fear  that  some  parts  of  what  I  said  were 
"to  some  a  stumbling  block,  and  to  others  a  foolishness."  And  perhaps 
it  would  be  well  for  me  further  to  say,  as  of  great  consequence,  the 
fact  that  a  quarter  of  a  million  in  money  had  gone  from  the  Sioux  City 
and  Pacific  Railroad  to  the  Fremont  and  Missouri  Valley  Railroad,  or 
half  a  million  in  rolling  stock;  and  especially  was  I  not  trying  to  raise 
any  credit  mobilier  question.  Some  four  days  were  devoted  to  the  dis- 
cussion of  Union  Pacific  matters  in  the  House  last  winter,  and  perhaps 
half  of  it  was  exhausted  in  arguing  upon  that  matter,  and  its  utter 
uselessness  was  demonstrated.  It  is  a  worn-out  subject. 

There  is,  if  you  will  permit  the  illustration,  a  chemical  element  which 
we  call  nitrogen,  which  is  the  flirt  of  chemistry,  whose  character  is ' 
want  of  stability  and  an  affinity  for  combinations.  We  become  tired  of 
hearing  Aristides  called  The  Just,  and  of  Cleon  called  a  leather  seller; 
and  in  just  such  a  way  a  man  has  been  accused  of  stealing  Southern 
spoons  until  they  made  him  a  governor;  and  if  there  should  appear  to 
be  even  a  representative  of  any  interest  of  those  who  were  expelled 
from  the  House  in  connection  with  the  credit  mobilier  on  this  reorgani- 
zation committee,  that  fact  might  commend  itself  because,  as  I  say,  the 
people  are  weary  of  this  thing.  Man  is  a  seminitrogenous  compound, 
and  I  do  not  propose  to  argue  against  chemical  reactions.  I  want  to 
take  the  situation  as  I  find  it,  and  to  deal  with  the  present  and  show 
you  that  the  Government  was  an  unconscious  interest  in  doing  injustice 
when  these  roads  were  constructed,  and  that  the  evil  has  gone  oa 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  69 

increasing,  and  being  aggravated,  until  it  lias  become  somewhat 
unbearable.  I  wish  to  ask  that  in  the  reorganization  of  these  roads  the 
evil  shall  be  put  an  end  to. 

There  is  a  relation  between  the  bill  which  Mr.  Littler  has  proposed 
and  the  other  bill,  and  it  irritated  me  a  little  that  it  was  thought 
advisable  that  his  proposition  should  be  presented  as  the  forerunner  of 
the  other,  as  it  was  said  to  have  no  relation  to  the  rest  of  the  situation. 
Mr.  Pierce  would  have  been  the  first  man  to  have  found  fault  with  Mr. 
Littler's  suggestion  if  it  was  not  certain  that  it  was  going  to  result  in 
harmony  with  his  own  plan. 

Coming  to  formulate  consecutively  propositions  concerning  which 
there  has  been  vague  and  almost  infinite  discussion  and  evidence  for  twq 
years,  there  are  three  reasons  urged  upon  you  why  this  property  should 
be  cheaply  sold.  One  of  them  is  that  your  road  is  paralleled  by  com- 
peting lines;  another,  that  it  is  a  headless  trunk  having  no  terminal  on 
the  Missouri  Eiver  and  no  bridge  across  it,  and  the  third  is  that  the 
third  mortgages  are  being  assembled  beneath  you  to  lift  you  out  of  any 
position  you  may  hold  in  the  property.  The  connection  of  the  Chicago 
and  Northwestern  with  all  these  propositions  is  what  I  wish  to  bring  to 
your  attention  first.  What  they  call  competing  lines  are  as  far  away 
north  as  the  Great  Northern  and  the  Northern  Pacific. 

(Mr.  Coombs  pointed  out  on  the  map  the  positions  of  the  various 
lines  of  railroad  which  were  referred  to  as  the  competitors  and  explained 
their  relations  to  each  other  and  to  the  Sioux  City  road.) 

Senator  BRICE.  Who  owns  that  bridge  over  the  Missouri! 

Mr.  COOMBS.  That  is  what  I  was  trying  to  find  out  the  other  day 
from  Mr.  Littler. 

Senator  STEWART.  Where  does  that  red  line  [indicating  on  the  inaD 
cross  the  Missouri  River? 

Mr.  COOMBS  [indicating  on  the  map].  At  a  place  called  Blair. 

Senator  STEWART.  Who  owns  that  bridge? 

Mr.  COOMBS.  The  bridge  was  built  by  the  Missouri  Valley  and  Blair 
Bridge  Company.  That  matter  will  be  worthy  of  a  good  deal  of  inves- 
tigation and  attention  when  you  come  to  dispose  of  that  property.  A 
subsidy  of  $16,000  a  mile  was  paid  for  every  consecutive  20  miles  of 
road.  One  of  your  Departments  permitted  a  ferry  to  be  used  as  a  tem- 
porary expedient,  and  when  authority  to  build  the  bridge  was  applied 
lor  it  was  to  be  built  by  the  Sioux  City  and  Pacific  road.  But  it  turns 
out  that  it  is  claimed  to  be  owned  by  a  company  of  which  Mr.  Blair, 
who  built  the  Sioux  City,  was  also  president.  The  entire  first-mortgage 
bonds  of  this  Sioux  City  road  (the  whole  $120,000  of  bonds)  were 
distributed  as  a  dividend  to  the  stockholders,  and  the  road  was,  sub- 
stantially, built  with  other  funds.  The  subsidy  was  paid  on  the  repre- 
sentation that  the  miles  were  consecutive.  The  Department  of  the 
Interior  said  that  the  ferry  was  only  accepted  as  a  temporary  expedient, 
and  if  the  company  did  not  own  the  bridge,  then  the  road  cost  scarcely 
as  much  as  the  subsidy  bonds  given  by  the  Government. 

And  yet  that  Sioux  City  and  Pacific  road  has  not  been  so  bad  a  prop- 
erty. No  one  in  the  world  has  abused  it  so  much  as  I  have,  as  a  part 
of  the  Union  Pacific  system. 

Senator  STEWART.  You  state  that  you  represent  a  large  number  of 
banking  institutions  and  investors.  Where  is  their  property  f 

Mr.  COOMBS.  All  located  here  [indicating  on  the  map]. 

Senator  STEWART.  They  have  got  a  bridge  up  there? 

The  CHAIRMAN.  They  loaned  their  money  to  a  company  in  Sioux 
City,  which,  under  the  high-pressure  business  of  that  country,  borrowed 


70  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

a  large  amount  of  money  from  these  banks  and  took  all  tlie  assets  of 
the  so-called  Credit-Commutation  Company  in  that  country,  among 
which  was  the  authority  for  building  a  bridge.  They  put  their  hands 
in  their  pockets  and  contributed  pro  rata  to  build  a  bridge. 

Mr.  COOMBS.  Yes,  sir. 

Senator  STEWART  (to  Mr.  Coombs).  How  is  their  interest  affected 
by  any  settlement  to  be  made  with  the  Union  Pacific? 

Mr.  COOMBS.  That  is  what  I  was  getting  up  to.  As  I  was  saying, 
the  Sioux  City  and.  Pacific  Railroad  was  not  so  bad  a  road  for  the  pur- 
poses for  which  it  was  designed — as  a  feeder  to  the  Chicago  and  North- 
western. The  latter  road  has  already  paid  out  considerable  money. 
It  paid  out  nearly  $300,000  to  the  Fremont,  Elkhorn  and  Missouri 
Valley  road.  The  Sioux  City  has  all  the  time  paid  interest  on  its  pre- 
ferred stock.  It  has  nearly  $300,000  in  the  hands  of  the  Government 
and  $350,000  in  its  own  hands;  and  that  is  nearly  as  much  as  it  cost. 
But  the  peculiarity  about  it  is  that  you  own  to-day  in  your  sinking  fund 
$716,000  of  these  same  first-mortgage  bonds.  Now,  why  should  you 
sell  it,  under  these  circumstances,  to  your  competitor? 

The  CHAIRMAN.  Do  you  think  it  wise  for  the  Government  to  purchase 
a  railroad  and  to  operate  it? 

Mr.  COOMBS.  You  are  advancing  me  to  a  question  which  I  would 
like  to  consider  a  little  later.  It  would  be  infinitely  better  for  the  Gov- 
ernment to  buy  that  road,  if  it  is  an  outlet  to  a  property  of  a  hundred 
millions  and  if  that  property  has  no  other  outlet. 

The  CHAIRMAN.  What  did  the  bridge  at  Sioux  City  cost? 

Mr.  COOMBS.  About  a  million  and  a  quarter. 

The  CHAIRMAN.  Is  it  a  wagon  road  and  a  railroad  bridge  combined? 

Mr.  COOMBS.  Everything. 

The  CHAIRMAN.  What  railroad  operates  it? 

Mr.  COOMBS.  Not  any. 

Senator  MORGAN.  Can  the  Government  take  a  mortgage  or  statutory 
lien  upon  a  railroad  as  security  for  a  debt  without  being  in  one  sense  a 
purchaser? 

Mr.  COOMBS.  Not  without  being  in  one  sense  a  purchaser.  Before 
it  is  actually  driven  to  the  wall  it  ought  to  buy  the  property  and  not 
"be  treated  as  a  party  incapable  of  defending  itself,  and,  therefore,  to  be 
beaten  or  cheated  out  of  the  property. 

Senator  WOLCOTT.  Are  you  coining  later  to  what  you  desire  to 
advocate  ? 

Mr.  COOMBS.  Yes. 

Senator  WOLCOTT.  I  understand  that  your  advocacy  of  a  Govern- 
ment purchase  is  not  the  real  solution  of  the  question  which  you  intend 
to  submit  to  the  committee. 

Mr.  COOMBS.  Oh,  no;  but  the  other  is  too  large  a  question. 

Senator  WOLCOTT.  I  hope  you  will  come  to  a  practical  recommenda- 
tion, if  you  have  any  solution  to  propose. 

Mr.  COOMBS.  My  solution,  in  brief,  is  one  that  I  think  you  have  got 
to  come  to.  The  competition  of  these  two  lines  is,  I  think,  inevitably 
foreshadowed.  The  parties  who  are  before  you  have  seen  that  there  is 
to  be  a  union  of  the  properties  which  they  represent,  against  which  it 
is  impossible  to  contend  on  any  basis  but  a  purchase  of  the  roads  by 
the  Government,  and  I  do  not  think  that  will  be  done.  I  think  you 
are  going  to  close  the  competition  and  make  a  monopoly  of  all  of  these 
lines.  What  I  want  is  that  in  compensation  for  that  there  shall  be  a 
freight  competition  from  Sioux  City  by  the  lakes.  I  think  that  the 
Sioux  City  and  Pacific  is  practically  worthless  as  a  part  of  the  Union 
Pacific,  and  that  we  are  going  to  lose  that  connection. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  71 

Senator  STEWART.  Explain  that  a  little  more  fully. 

Mr.  COOMBS.  There  was  an  original  railroad  designed  (and  the  act 
was  passed)  from  North  Platte  northwest  to  Sioux  City,  to  lead  to  water 
transportation  at  the  end  of  the  way  to  the  hundredth  parallel.  As 
you  are  sure  to  lose  all  competition  on  the  central  lines  between  the 
Union  Pacific  and  the  Chicago  and  Northwestern,  and  as  nearly  all  of 
the  States  have  passed  laws  against  the  combination  of  parallel  roads, 
there  would  be  a  great  relief  from  competition  between  water-borne 
freights  and  overland  freights. 

Senator  WOLCOTT.  Then  you  want  the  Government  to  build  another 
line  of  road  ? 

Mr.  COOMBS.  I  want  the  Government  to  shift  some  of  its  securities. 

Senator  WOLCOTT.  Tell  us  how. 

Mr.  COOMBS.  I  will  tell  you  how.  I  suppose  it  goes  without  saying 
that  the  dominating  mind  in  this  reorganization  proposition  is  that  of 
the  Chicago  and  Northwestern  Railroad  Company.  Mr.  Littler's  propo- 
sition is  not  that  the  commission,  which  his  bill  suggests,  shall  fix  the 
price  for  whicli  the  Northwestern  shall  own  the  road,  but  that  the  Gov- 
ernment shall  pay  $20,000  to  establish  a  commission  which  shall  be 
open  for  the  introduction  by  him  of  evidence  to  depreciate  your  prop- 
erty, and  if  the  findings  of  the  commission  are  approved  by  the  Presi- 
dent, the  Chicago  and  Northwestern  road  is  to  have  the  option  to  pay 
the  amount  or  not  ns  it  sees  fit. 

The  CHAIRMAN.  Can  not  that  difficulty  be  met  by  a  provision  in  the 
law  that  the  matter  must  be  closed  within  a  limited  time? 

Mr.  LITTLER.  Another  answer  to  that  proposition  is  that  if  we  do 
not  comply  with  the  proposition,  the  Government  will  have  the  right 
to  proceed  with  its  foreclosure  proceedings. 

Mr.  COOMBS.  Oh,  yes,  the  bill  can  be  amended,  of  course,  in  half  a 
dozen  ways. 

The  CHAIRMAN.  Then  the  original  right  would  stand. 

Mr.  COOMBS.  Yes 5  but  that  is  not  the  bill  as  it  is  to-day.  It  is  as  if 
preceding  a  war  with  Great  Britain  we  were  to  give  that  power  an  option 
over  our  coast  defenses,  awaiting  the  outcome  of  an  invasion.  The  inter- 
est which  I  represent  is  an  interest  affected  rather  than  an  interest 
invaded,  and  the  interests  that  will  be  affected  by  the  disposition  which 
you  make  of  this  large  part  of  the  road  are  most  momentous.  I  take  it 
that  this  Congress  is  not  the  mere  collector  of  debts  of  a  bankrupt 
or  spendthrift  predecessor,  and  that  the  welfare  of  the  country  is  as 
much  considered  to-day  as  it  was  when  the  Government  went  into  the 
scheme  of  aiding  railroads  in  the  first  instance.  The  Union  Pacific  as 
it  was  designed,  as  you  know,  was  inspired  by  the  Government  putting 
forth  great  efforts  to  reduce  the  Confederate  States.  It  perhaps  received 
its  only  constitutional  sanction  when  presented  as  a  great  military  high- 
way to  repel  foreign  invasion  on  either  ocean,  or  on  the  Gulf  or  lakes. 
It  was  designed  from  the  first  that  it  should  spring  east  from  this  great 
north  and  south  trend  of  the  Missouri  Eiver  [exhibiting  on  the  map] 
between  Kansas  City  on  the  south  and  Sioux  City  on  the  north,  and  that 
the  roads  from  there  north  and  south  should  converge  at  a  common 
point  in  the  Platte  Valley  in  the  hundredth  meridian.  The  southern  leg 
of  the  tripod  was  to  start  from  Kansas  City.  At  first  it  was  provided 
that  it  should  run  northwest  to  the  hundredth  meridian,  but  afterwards 
they  had  it  changed,  under  the  act  of  1864,  so  that  the  road  was  to  con- 
tinue straight  west.  They  received  the  same  subsidy  as  they  would 
have  done  if  they  had  gone  northwest  to  the  hundredth  meridian,  get- 
ting $6,000,000  or  $7,000,000  for  a  line  ending  at  the  three  hundred  and 
ninety- fourth  milepost  in  the  prairie. 


72  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

The  Chicago  and  Northwestern  Company,  as  I  said  the  other  day,  is 
a  large  factor  in  a  great  combination  of  roads  owned  by,  perhaps,  the 
richest  family  in  the  world — a  family  all  of  whose  fortune  is  invested 
in  railroad  enterprises.  That  road  reaches  every  important  point  west- 
ward from  Chicago.  It  covers  this  great  circumference  [indicating  on 
the  map],  starting  at  the  head  of  the  lakes,  sweeping  around  Uuluth, 
St.  Paul,  Minneapolis,  Sioux  City,  and  Atchison.  That  is  a  brief 
description  of  a  vast  power,  but  that  does  not  cover  it.  For  years  it 
has  had  arrangements  with  the  Union  Pacific  by  which  every  pound  of 
unconsigued  freight  originating  at  a  point  on  either  road  and  designed 
for  a  point  on  the  other  road  is  exchanged  between  them  to  the  exclu- 
sion of  every  other  competitor.  The  Chicago  and  Northwestern  is 
practically  controlled  by  the  Vanderbilt  family,  and  its  interest  is  to 
gather  up  to  its  own  lines  all  of  the  freight  and  traffic  originating  on 
the  Union  Pacific  and  bound  to  the  east.  It  transfers  its  freight  at 
Chicago  to  the  Lake  Shore  and  Michigan  Southern  road,  by  which  it  is 
hauled  to  Buffalo,  and  there  it  is  turned  over  to  the  pride  of  the  associa- 
tion— the  New  York  Central — and  carried  to  New  York.  The  reorganiza- 
tion proposition  that  is  before  you  proposes  to  perpetuate  and  continue 
that  operation.  It  is  a  great  power,  but,  as  I  said  before  the  House 
committee,  that  is  no  reason  why  you  should  not  treat  with  it,  because 
if  you  treat  with  it  you  are  certain  that  whatever  they  give  you  will  be 
good  and  that  they  are  able  to  carry  out  their  own  trade.  You  under- 
stand that  with  the  reorganization  plan  carried  out  that  family  will 
control  some  20,000  miles  of  railroad,  stocked  and  bonded  to  an  amount 
of  $1,000,000,000,  and  with  an  annual  income  of  $150,000,000.  All  of 
the  railroads  in  this  country  are  only  stocked  and  bonded  at  about 
$10,000,000,000,  and  their  whole  assessed  valuation  is  only  $24,000,- 
000,000.  So  that  this  combination,  with  its  10  per  cent  of  value  and 
efficiency  of  all  the  railroads  of  the  country,  will  represent  directly  a 
property  equal  to  4  or  5  per  cent  of  your  whole  assessed  valuation. 

The  great  founder  of  the  Chicago  and  Northwestern  was  Mr.  John  J. 
Blair.  At  the  time  that  the  Pacific  railroads  were  under  construction 
Mr.  Blair  was  building  a  road  across  Iowa.  He  ran  a  survey  up  the 
eastern  valley  of  the  Missouri  River  to  Sioux  City.  You  would  have 
called  it  a  feeder  of,  or  an  extension  to,  the  Chicago  and  Northwestern, 
only  that  Mr.  Blair  left  5£  miles  between  the  two  roads.  He  called  his 
road  the  Sioux  City  and  Pacific  Railroad,  although  nobody  dreamed  of 
its  having  any  connection  with  the  Pacific  at  that  time.  Afterwards,  by 
the  act  of  1864,  the  President  of  the  United  States  was  allowed  to  des- 
ignate the  company  which  should  build  the  northwestern  leg  of  the  Union 
Pacific  from  Sioux  City,  and  Mr.  Blair  persuaded  President  Lincoln  to 
designate  the  Sioux  City  and  Pacific.  A  road  by  that  route,  as  well  as 
by  any  other,  could  be  built  to  join  the  Union  Pacific,  and  if  it  had  been 
done,  you  will  see,  looking  back  thirty  years,  that  Sioux  City  would  have 
wanted  a  bridge  across  the  Missouri  River,  and  would  have  been  made 
the  largest  city  of  the  Northwest. 

The  CHAIRMAN.  Was  it  not  supposed  that  representations  were  made 
to  President  Lincoln  that  this  road  was  to  be  built  in  the  direction 
originally  designed  for  it? 

Mr.  COOMBS.  President  Lincoln  was  dead  before  the  location  was 
made. 

The  CHAIRMAN.  He  had  the  designation? 

Mr.  COOMBS.  He  designated  the  company  but  not  the  location. 

Senator  STEWART.  The  map  and  direction  of  the  road  were  not 
made  before  Mr.  Lincoln's  death. 


GOVERNMENT   DEBT    OP   THE   PACIFIC    RAILROADS.  73 

Mr.  COOMBS.  No,  sir.  After  Mr.  Lincoln's  death,  to  everybody's  sur- 
prise (and  I  think  to  the  ridicule  of  some  who  are  now  living  and  are 
acquainted  with  the  facts)  this  road-located  its  southwestern  connection 
to  the  Pacific  on  a  previous  survey  of  this  feeder  to  the  Chicago  and 
Northwestern.  It  started  at  Sioux  City  to  the  Pacific  and  ran  south- 
west toward  the  Missouri  lliver  to  a  place  which,  with  a  sort  of  grim 
humor,  is  called  California  Junction — perhaps  to  save  the  road  from 
discouragement  by  the  fact  that  it  was  25  or  30  miles  farther  away  from 
California  than  when  it  began.  There  it  found  a  projected  extension 
of  the  Cedar  Kapids  road,  and  cut  out  the  loop.  From  there  it  went 
straight  over  to  Fremont.  Now  the  consequences  of  this  have  gone  on 
aggravating  from  that  day  to  this.  There  was  at  that  time  in  the  entire 
Northwestern  group  of  States  but  625  miles  of  railroad,  and  only  3,200 
in  the  whole  United  States;  but  that  625  miles  of  railroad  (all  in  Iowa) 
was  just  as  much  entitled  to  consideration  as  the  Hannibal  and  St.  Jo 
Eailroad,  or  any  of  them.  Its  influence  was  pressing,  and  if  the  line 
had  been  built  I  do  not  hesitate  to  say  that  the  Union  Pacific  would 
not  have  failed  at  all.  The  railroad  development  of  the  Northwest  has 
been  enormous.  There  are  to-day  in  that  group  of  States  alone  2,900 
miles  of  railroad — within  300  of  the  number  of  miles  that  the  whole 
country  had  at  that  time. 

(Mr.  -Coombs  pointed  out  on  the  map  the  various  groups  of  railroads 
in  the  North  west  and  indicated  the  location  of  the  bridge  at  Sioux  City, 
which  he  said  the  Chicago  and  Northwestern  Company  had  to  build  or 
suffer  it  to  go  into  the  hands  of  other  parties,  because  the  State  had 
voted  aid  to  the  bridge.) 

The  CHAIRMAN.  Eight  west  of  this  great  stretch  of  the  Missouri  is 
there  a  country  which  consists  only  of  bad  lands  inimical  to  business? 

Mr.  COOMBS.  What  you  say  is  true  to  this  extent:  There  is  a  bad- 
land  range,  but  after  a  hundred  miles  it  is  not  so;  when  you  strike  the 
Platte  Valley  the  lands  get  better. 

The  CHAIRMAN.  The  country  above  Sioux  City  is  bad  lands? 

Mr.  COOMBS.  Yes;  above  Sioux  City,  and  especially  at  the  first  west- 
ern turn  of  the  river. 

Senator  BRIOE.  Please  come  to  the  suggestions  you  have  to  make  to 
the  committee. 

Senator  WOLCOTT.  All  this  statement  of  yours  is  of  surpassing 
interest,  but  what  the  committee  seeks  is  some  reason  why  the  proposed 
plan  should  not  be  adopted,  with  some  good  reason  in  favor  of  that 
which  we  ought  to  do.  The  committee  does  not  want  so  much  history. 
It  is  of  fascinating  interest,  but  we  want  something  of  value.  For 
instance,  the  story  about  the  building  of  the  bridge  thirty  years  ago  is 
really  not  of  any  help  to  the  committee. 

Mr.  COOMBS.  I  will  pursue  any  course  that  the  committee  desires. 
I  have  a  proposition  to  make  which  perhaps  would  not  be  received 
without  some  argument.  Whether  I  stated  the  proposition  first  and 
argued  it  afterwards,  or  made  the  argument  first,  which  might  lead  to  it, 
is  immaterial  to  me.  I  have  said  that  injustice  was  done  in  the  location 
of  this  Sioux  City  and  Pacific  road.  The  evidence  of  how  the  road 
happened  to  be  built  appears  to  me  to  be  something  which  should  be 
submitted  to  the  committee.  I  present  this  question :  The  Congress  of 
to-day  would  not  devote  itself  entirely  to  the  remedying  of  a  wrong 
done  in  the  past,  but  would  do  almost  anything  for  the  future,  and  if 
the  two  were  combined — if  there  was  an  injustice  in  the  past,  taken  by 
itself,  would  not  perhaps  appeal  to  you,  because  Congress  could  not  go 
on  correcting  every  mistake  of  its  predecessors — the  interests  of  each 


74  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

might  be  considered.  What  I  want  is  that  in  the  arrangement  which 
you  may  make  you  shall  invest  a  portion  of  the  sinking  fund,  now  in 
the  hands  of  the  Government,  for  the  correction  of  an  evil  in  the  past 
and  for  the  general  welfare  in  the  future. 

The  CHAIRMAN.  Were  not  the  bonds  of  the  sinking  fund  to  apply  to 
the  liquidation  of  the  original  debt  of  the  Pacific  railroads! 

Mr.  COOMBS.  Yes;  but  they  are  still  the  property  of  the  Union 
Pacific,  and  it  is  for  Congress  to  consider  what  use  is  to  be  made  of 
them.  I  think  it  is  prudent  for  me  to  urge  and  have  you  consider  the 
comparison  between  railroad  routes  and  water-borne  routes  by  way  of 
the  lakes  to  the  East  which  this  would  facilitate. 

Senator  WOLCOTT.  What  would  facilitate? 

Mr.  COOMBS.  The  route  from  North  Platte  to  Sioux  City. 

Senator  BRICE.  How  far? 

Mr.  COOMBS.  Two  hundred  and  fifty  miles. 

Senator  BRICE.  How  much  would  it  cost? 

Mr.  COOMBS.  About  $20,000  a  mile.     It  has  been  surveyed. 

Senator  BRICE.  What  right  has  Congress  to  build  it? 

Mr.  COOMBS.  The  same  right  as  it  had  to  build  the  Pacific  Eailroads 
in  the  first  instance. 

Senator  MORGAN.  Has  Congress  not  exhausted  its  powers  in  build- 
ing what  it  has  done? 

Mr.  COOMBS.  You  have  now  a  trade  in  hand.  You  are  to  meet  Mr. 
Pierce  on  a  proposition  which  he  says  is  elastic — not  a  hard  and  fast 
proposition.  The  reorganization  committee  is  to  keep  $13,000,000  in 
its  own  treasury  for  corporate  purposes  and  $7,000,000  of  preferred 
stock,  and  you  are  to  give  and  take  in  the  trade  in  many  ways.  And 
I  want  you  to  let  him  have  the  Sioux  City  and  Pacific  road.  I  think, 
however,  that  it  is  wise  and  fair,  and  that  it  will  commend  itself  to  the 
people,  for  you  to  establish  competition  by  way  of  the  lakes. 

Senator  STEWART.  What  road  would  give  you  that  connection? 

Mr.  COOMBS.  Half  a  dozen  of  them — principally  the  southwest  branch 
of  the  Great  Northern  Railroad.  W'ater-borne  transportation  is  one- 
twelfth  the  price  of  the  lowest  rate  of  an  overland  haul.  The  Erie 
Canal  has  been  the  dominant  factor  in  bringing  down  the  tolls  of  the 
New  York  Central,  and  all  the  other  railroads  have  to  follow  it. 

Senator  WOLCOTT.  What  is  your  plan? 

Mr.  COOMBS.  Either  that  a  part  of  the  sinking  fund  shall,  in  accord- 
ance with  the  original  intention,  be  invested  in  the  first-mortgage  bonds 
of  a  road  from  North  Platte  to  Sioux  City,  or  that  there  be  a  like  pro- 
vision made  for  the  purpose  of  constructing  such  a  road. 

Senator  WTOLCOTT.  For  the  Government  to  construct  it? 

Mr.  COOMBS.  For  another  company  to  do  so. 

Senator  WOLCOTT.  The  company  which  you  represent? 

Mr.  COOMBS.  The  company  which  I  will  represent. 

Senator  WOLCOTT.  Your  suggestion  is  that  we  shall  transfer  some  of 
these  securities  to  you  that  you  may  construct  this  road  ? 

Mr.  COOMBS.  Transfer  them  in  a  first  mortgage  on  another  road. 

Senator  WOLCOTT.  To  the  extent  of  how  much  per  mile? 

Mr.  COOMBS.  Twenty  thousand  dollars  a  mile. 

Senator  WOLCOTT.  By  way  of  a  subsidy? 

Mr.  COOMBS.  By  way  of  a  transfer  of  a  subsidy  from  one  road  to 
another. 

The  CHAIRMAN,  \ouwant  the  Government  to  advance  $5,000,000  to 
build  250  miles  of  road  that  wdl  cost,  presumably,  $20,000  a  mile? 

Mr.  COOMBS.  Yes. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  75 

The  CHAIRMAN.  In  plain  English,  then,  yon  want  the  Government 
to  build  the  road  in  its  entirety? 

Mr.  COOMBS.  I  would  not  say  that. 

The  CHAIRMAN.  That  is  practically  the  proposition. 

Mr.  COOMBS.  If  you  put  it  in  that  way  that  is  practically  the  proposi- 
tion; I  hoped  that  it  would  not  come  in  that  way.  Having  stated  it,  I 
am  free  to  stop  now. 

The  CHAIRMAN.  Will  you  make  your  proposition  in  writing? 

Mr.  COOMBS.  If  you  desire. 

Senator  WOLOOTT.  What  is  the  company  that  you  represent  I 

Mr.  COOMBS.  The  Credits  Commutation  Company. 

Senator  WOLCOTT.  What  is  its  capital? 

Mr.  COOMBS.  Its  principal  capital  is  the  power  of  assessment  which 
the  stockholders  have  assumed. 

Senator  WOLCOTT.  How  much  is  invested  in  it? 

Mr.  COOMBS.  I  can  not  tell.  It  depends  on  the  results  of  the  develop- 
ment of  the  business  in  which  it  is  engaged. 

Senator  WOLCOTT.  How  much  money  is  invested? 

Mr.  COOMBS.  Perhaps  $5,000,000  or  $6,000,000. 

Senator  WOLCOTT.  Is  it  represented  at  Sioux  City? 

Mr.  COOMBS.  No;  on  railroad  enterprises  which  we  pledge  the  accom- 
plishment of,  but  which  I  have  not  been  talking  about. 

Senator  WOLCOTT.  Railroads  to  Sioux  City? 

Mr.  COOMBS.  Directly. 

Senator  WOLCOTT.  Does  it  include  some  real  estate  interests  in 
Sioux  City? 

Mr.  COOMBS.  I  do  not  think  it  does.     It  does  in  one  class  of  notes. 

Senator  WOLCOTT.  You  have  a  bridge  there? 

Mr.  COOMBS.  Yes. 

Senator  WOLCOTT.  Do  you  desire  to  utilize  that  bridge  for  railroad 
purposes  ? 

Mr.  COOMBS.  We  do. 

Senator  WOLCOTT.  You  have  spoken  of  the  bad  conduct  of  the  Chi- 
cago and  Northwest  Company,  and  yet  you  say  in  your  argument  that 
the  committee  might  let  the  Chicago  and  Northwest  Company  have  the 
Sioux  City  and  Pacific  road,  provided  you  get  the  Government  to  build 
this  250  miles  between  North  Platte  and  Sioux  City? 

Mr.  COOMBS.  Yes. 

Senator  WOLCOTT.  Otherwise  not  ? 

Mr.  COOMBS.  Otherwise  not. 

Senator  WOLCOTT.  Therefore,  practically,  what  you  are  desirous 
that  the  committee  should  do  is  to  build  up  the  interest  of  Sioux  <  'it y. 
where  your  clients  have  their  money  invested? 

Mr.  COOMBS.  We  are  at  the  front;  we  are  the  representative  of  other 
cities  of  the  West. 

Senator  WOLCOTT.  Do  you  mean  the  cities  of  Minneapolis  and  St. 
Paul? 

Mr.  COOMBS.  Yes. 

Senator  WOLCOTT.  And  Duluth? 

Mr.  COOMBS.  Yes. 

Senator  WOLCOTT.  You  represent  them  all  officially? 

Mr.  COOMBS.  I  know  that  1  am  speaking  in  behalf  of  their  interests. 
We  are  at  the  very  front.  We  are  at  the  great  bend  of  the  Missouri 
River,  and  a  line  which  bisects  that  angle  would  benefit  all  of  us. 

Senator  WOLCOTT.  And  anything  which  benefits  Sioux  City  will 
indirectly  benefit  the  rest  of  the  world? 


76  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  COOMBS.  Yes. 

Senator  FRYE.  Mr.  Ooombs's  claim  is  that  when  these  provisions  for 
the  Pacific  railways  are  made,  and  when  the  treaty  is  completed,  you 
are  foreclosed  absolutely  against  any  railroad  competition  whatever, 
and  that  his  road  from  Sioux  City  to  the  one  hundredth  parallel  would 
open  up  a  competing  line  for  the  whole  continent. 

Senator  BRICE.  He  said  that  this  reorganization  committee  is  directed 
by  the  Chicago  and  Northwest  road. 

Mr.  COOMBS.  The  road  which  I  want  built  would  open  the  way  from 
Sioux  City  to  the  head  of  the  lakes. 

Mr.  BRICE.  How  would  you  get  farther  west  ? 

Mr.  COOMBS.  That  is  another  point  which  I  want  to  present  to  the 
committee.  In  the  House  last  winter,  I  urged  before  the  Pacific  Rail- 
way Committee  that  the  contract  existing  between  the  Chicago  and 
Northwest  and  the  Union  Pacific  shut  out  all  competition,  and  that  no 
line  built  by  private  capital  could  get  a  pound  of  the  unconsigned 
freight  between  these  two  roads,  and  could  not  make  any  headway 
against  the  combination.  The  House  committee,  therefore,  put  in  the 
bill  last  year  a  provision  that  any  road  built  there  should  have  its 
proportionate  share  of  the  business,  and  that  provision,  I  am  credibly 
informed,  is  the  one  which  made  the  Union  Pacific  people  immediately 
file  a  memorial  saying  that  they  would  not  accept  the  bill  with  that 
provision  in  it.  The  proposition  which  I  am  making  in  behalf  of  my 
people  is  one  which  affects  Colorado,  one  that  affects  California,  and 
one  without  which  there  is  no  relief  for  any  of  us.  There  are  ships 
coming  into  New  Orleans  to-day  whose  single  cargo  would  load  4  solid 
miles  of  freight  cars;  and  so  too  in  the  ports  of  New  York  and  Boston; 
and  50  ships  would  stall  all  these  railroads. 

Senator  WOLCOTT.  Why  should  not  the  Government  build  a  road 
from  Colorado  south  as  well  as  build  your  road  i 

Mr.  COOMBS.  I  would  say  nothing  against  it. 

Senator  WOLCOTT.  Then  you  want  yours,  as  one  of  the  series  of  roads, 
to  be  built  by  the  Government! 

Mr.  COOMBS.  I  would  have  no  objection  to  other  roads. 

Senator  MORGAN.  You  are  familiar  with  all  these  projects,  do  you 
know  any  reason  why  the  Government  of  the  United  States  is  under 
the  necessity  of  assisting  and  forcing  the  Union  Pacific  and  the  Central 
Pacific  into  bankruptcy,  or  subjecting  that  property  to  sale  under 
such  conditions  as  would  effect  bankruptcy? 

Mr.  COOMBS.  On  the  contrary,  if  you  ask  me  that  question,  I  think 
that  the  Government  of  the  United  States  ought  to  take  up  the  under- 
lying liens  on  these  roads  and  put  the  property  in  the  hands  of  some 
other  corporation  or  of  the  same  corporation;  but  the  Government 
should  never  lose  its  control  over  them  and  should  never  be  driven  into 
such  a  position  as  to  be  unable  to  take  care  of  itself  as  if  it  were  a  baby. 

Senator  MORGAN.  At  the  time  that  the  Government  exercised  the 
right  to  charter  these  companies  there  was  no  objection,  as  I  understand 
it,  from  any  State  between  the  Missouri  River  and  the  Pacific  Ocean 
to  the  exercise  of  this  power? 

Mr.  COOMBS.  1  am  not  aware  of  any. 

Mr.  MORGAN.  There  was  one  State  between  the  Missouri  River  and 
the  Pacific  Ocean — California.  The  rest  of  the  region  was  all  Territory, 
from  Omaha  on  to  the  boundary  line  of  California.  The  Government 
having,  in  virtue  of  its  sovereign  power  over  the  Territories,  exercised 
this  right  of  chartering  these  companies  and  of  aiding  in  the  construc- 
tion of  these  roads,  and  having  reserved  to  itself  certain  important 
powers  and  rights  of  jurisdiction  over  the  roads — having  made  it,  in 


GOVERNMENT    DEBT   OF    THE    PACIFIC    RAILROADS.  77 

other  words,  a  governmental  instrumentality  for  the  transmission  of 
mails,  and  troops,  and  provisions,  and  munitions  of  war,  do  you  know 
of  any  reason  why  the  Government  should  now  surrender  all  these 
privileges  and  rights,  and  take  the  risk  of  regaining  them  through  the 
consent  of  the  States  through  which  the  railroads  pass  ? 

Mr.  COOMBS.  I  am  guided  more  in  my  opinion  by  what  can  be  done 
than  by  what  should  be  done.  The  majority  of  the  people  of  the  United 
States  do  not  want  the  Government  to  run  a  railroad.  The  minority 
of  the  people — which  is  a  respectable  minority — does  want  it  done,  and 
a  fair  compromise  between  these  two  opinions  is  to  allow  the  operation 
of  the  road  by  a  company  with  such  stringent  oversight  and  control 
as  to  prevent  oppression  and  to  secure  the  best  interests  of  all. 

Senator  MORGAN.  To  the  extent  of  having  four  directors  in  each  of 
these  companies  the  Government  is  running  these  railroads? 

Mr.  COOMBS.  The  Government  is  in  the  railroad  business  in  its  most 
critical  stages. 

Senator  MORGAN.  We  are  now,  and  have  been  a  long  time,  running 
these  railroads,  as  far  as  Government  directors  are  concerned. 

Mr.  COOMBS.  Yes. 

Senator  MORGAN.  So  that  the  Government  of  the  United  States  has 
been  the  holder  of  a  power  which  might  be  converted  into  a  balance 
of  power,  through  that  board  of  directors,  without  owning  a  dollar  of 
stock.  That  has  been  our  situation,  has  it  not! 

Mr.  COOMBS.  Yes. 

Senator  MORGAN.  Is  there  any  reason  why  we  should  yield  that  power 
and  run  the  risk  of  regaining  it  (if  it  is  important)  by  the  consent  of 
the  States  hereafter  to  some  new  organization  which  would  change  the 
whole  programme? 

Mr.  COOMBS.  I  do  not  care  to  give  an  opinion  on  that  point.  My 
views  would  not  be  very  valuable.  I  have  gone,  perhaps,  as  far  as  I 
ought  to.  A  railroad  can  not  be  run  as  a  highway,  as  some  people  in 
California  suggest,  aM  yet  complaint  of  California  is  not  without 
justice.  She  pays  something  like  forty  millions  a  year  to  railroads  for 
transcontinental  business. 

The  CHAIRMAN.  Is  it  not  true  that  the  rates  charged  to-day  to  Cali- 
fornia are  only  about  40  per  cent  of  what  they  were  originally'? 

Mr.  COOMBS.  Yes. 

The  CHAIRMAN.  Has  not  the  natural  competition  from  other  roads  a 
constant  tendency  to  lower  rates? 

Mr.  COOMBS.  Yes. 

The  CHAIRMAN.  Then  the  point  comes  whether  California,  so  far  as 
the  long  haul  is  concerned,  pays  a  higher  rate  to-day  than  is  a  proper 
rate  on  the  capital  invested  in  the  railroads? 

Mr.  COOMBS.  It  is  hard  to  say;  I  think  that  California  has  but  one 
relief.  There  are  three  plans  suggested  for  adjusting  the  difficulty  of 
the  Government  with  these  roads.  One  is  the  refunding  scheme  of 
Senator  Frye,  which  has  been  the  foundation  of  everything  suggested 
since  (the  refunding  of  the  Government  debt  subject  to  the  prior  lien). 
Another  plan  is  the  reorganization  of  the  Union  Pacific  company  as 
presented  by  the  present  reorganization  committee;  and  the  third  is  for 
the  Government  to  buy  the  roads  and  to  operate  them,  or  put  them  in 
the  hands  of  a  company  which  the  Government  should  create.  Of  these 
various  plans  it  seems  to  be  quite  generally  conceded  that  the  refund- 
ing plan  is  best  for  California  or  the  Central  Pacific  end  of  the  line,  but 
California  can  not,  of  course,  have  this  road  run  at  a  loss  by  the  Govern- 
ment, and  it  seems  to  me  just  as  well  to  let  the  present  people  take  it. 


78  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

V' 

The  CHAIRMAN.  You  have  given  a  good  deal  of  attention  to  this  sub 
ject.  Is  it  the  result  of  your  observation  that  if  the  Government  AMIS 
to  own  and  operate  these  roads  the  people  of  California  and  the  people 
all  the  way  that  are  tributary  to  this  line,  would  be  as  well  served  in  the 
matter  of  freights  and  general  traffic  as  they  are  served  under  the  pres- 
ent ownership? 

Mr.  COOMBS.  I  do  not  think  so. 

Senator  STEWART.  Why  not? 

Mr.  COOMBS.  No  more  than  the  people  would  be  better  served  if  the 
Government  was  to  take  the  Western  Union  telegraph  line  from  Ogden 
to  San  Francisco  and  run  it  as  a  Government  telegraph  line  in  the  midst 
of  Mr.  Gould's  great  Western  Union  telegraph  system.  That  one  line 
of  telegraph  in  the  hands  of  the  Government  would  not  be  able  to  serve 
the  public  as  well  as  if  it  was  part  of  the  general  system.  If  you  were 
to  adopt  the  system  of  telegraphing  and  made  it  as  much  a  part  of  the 
Government  business  as  the  post-office  system,  you  might  be  able  to  do 
so,  but  to  jn'oject  itself  into  the  situation  with  a  single  line  would  not 
be  practicable. 

Senator  MORGAN.  Laying  aside  every  other  question  and  considera- 
tion except  the  usefulness  of  that  part  of  the  road  from  Sioux  City,  what 
would  be  the  disadvantage  of  selling  and  disposing  of  that  part  of  the 
road  to  the  Union  Pacific  at  a  fair  price? 

Mr.  COOMBS.  That  is,  of  course,  your  only  way  across  the  Missouri 
lliver,  and  your  only  way  out,  and  with  the  bridges  at  Omaha  and 
Sioux  City  in  the  hands  of  the  Union  Pacific  there  could  be  no  railroad 
competition. 

Now,  I  have  a  word  to  say  in  behalf  of  our  private  interest.  The 
people  of  Sioux  City  have  appreciated  this  situation,  even  iflt  has  not 
been  appreciated  at  Washington.  In  fact,  the  United  States  Railroad 
Commissioner  himself  frankly  admits,  in  his  report  of  1879,  that  this 
was  a  mistake.  It  is  not  an  idea  which  originates  with  us;  but  Govern- 
ment officials  themselves  have  called  attention  to  it.  We  at  the  North- 
west, however,  have  felt  it  keenly;  and,  in  1890,  an  organization  was 
formed  of  the  principal  citizens  (financially)  of  Sioux  City  to  break 
through  the  environments  which  seemed  to  surround  the  city.  They 
wanted  one  railroad  of  100  miles  to  the  north  of  Sioux  City  to  join  the 
southwestern  branch  of  the  Great  Northern  coming  to  the  head  of  the 
lakes  at  that  point,  and  another  railroad  of  120  miles  west  of  Sioux 
City  to  penetrate  the  corn  belt  of  Nebraska  and  to  seek  connection  with 
the  roads  of  that  section;  and  they  wanted  a  large  terminal  in  Sioux 
City,  and  a  bridge  across  the  river,  the  terminal  being  suitable  to 
accommodate  all  the  railroads  on  equal  terms. 

All  of  these  properties  failed  in  1893.  All  of  them  negotiated  loans 
through  one  Boston  trust  company,  and  that  failed  too.  The  road  to 
the  north  was  bonded  for  $2,000,000;  it  had  cost  $2,500,000.  The  road 
to  the  west  had  cost  $2,500,000,  and  all  of  its  bonds  and  all  of  its  stock 
were  pledged  to  certain  New  York  parties  to  secure  $1,500,000. 

Senator  WOLCOTT.  You  had  watered  the  stock  of  the  road  to  the 
north  to  the  amount  of  $900,000? 

Mr.  COOMBS.  Yes;  the  terminals  had  cost  about  $2,000,000  and  were 
mortgaged  for  $2,500,000. 

The  CHAIRMAN.  The  terminals  were  in  separate  ownership? 

Mr.  COOMBS.  Yes,  there  had  been  half  a  million  dollars  spent  on  the 
bridge  and  it  was  under  way  to  that  extent.  The  people  of  Sioux 
City  impressed  their  creditors  with  the  value  of  the  idea  of  breaking 
through  and  getting  southwestern  and  northwestern  connections,  and 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  79 


that  idea  was  about  all  the  collateral  and  assets  which  the  company 
had.  The  people  of  Sioux  City  said  that  if  we  would  coine  there  and 
build  a  bridge  to  connect  these  properties  and  rehabilitate  them  they 
would  vote  us  a  subsidy  to  the  extent  of  $3,000,000,  which  was  about 
as  much  to  them  as  it  would  be  to  the  people  of  the  United  States  to 
pay  the  national  debt. 

The  CHAIRMAN.  And  they  got  their  bankers  to  reassess  themselves 
an  additional  amount  in  consideration  of  that  local  aid? 

Mr.  COOMBS.  The  bankers  pooled  their  losses,  but  provided,  in  arti- 
cles of  association,  that  they  might  be  assessed  without  limit,  and  they 
went  on  rebuilding  the  properties  (perhaps  putting  in  a  million  dollars 
to  complete  the  bridge). 

The  CHAIRMAN.  The  tax  voted  by  the  citizens  of  Sioux  City  them- 
selves went  directly  to  the  interest  of  this  banking  association1? 

Mr.  COOMBS.  If  we  complete  the  bridge  on  or  before  the  1st  day  of 
March,  1896. 

The  CHAIRMAN..  Otherwise  not? 

Mr.  COOMBS.  Otherwise  not.  There  is  eight  or  ten  millions  invested 
substantially  in  the  proposition  I  am  urging  on  you.  The  question  con- 
cerning the  $3,000,000  pledge  is  before  the  court  of  appeals  and  I 
anticipate  a  decision  on  which  we  can  recover  the  securities  in  propor- 
tion to  the  money  advanced.  If  that  be  so,  and  if  the  roads  are  left 
as  they  are,  I  shall  not  redeem  the  terminal,  but  shall  go  back  to  the 
house  lots  and  the  bridge,  leaving  the  terminal  as  a  representative  of 
my  folly. 

Senator  WOLCOTT.  When  did  your  company  make  this  investment? 

Mr.  COOMBS.  In  1891  or  1892. 

Senator  WOLCOTT.  Some  twenty  years  after  what  you  consider  this 
great  wrong  was  done? 

Mr.  COOMBS.  Yes. 

The  CHAIRMAN.  Did  this  banking  association  own  an  interest  in  the 
North  Platte  Line  to  Sioux  City? 

Mr.  COOMBS.  Not  that  I  am  aware  of. 

The  CHAIRMAN.  Or  in  the  packing-house  arrangements  there? 

Mr.  COOMBS.  We  own  a  packing-house  there  and  a  stock  yard. 

The  CHAIRMAN.  That  was  no  part  of  the  original  scheme? 

Mr.  COOMBS.  I  offered  a  packer  there  the  other  day  property  in  good 
condition  which  cost  $600,000.  I  offered  it  to  him  as  a  gift  if  he  would 
come  there  and  kill  beef,  but  it  was  so  doubtful  a  proposition  that  he 
would  not  take  the  gift.  The  interests  I  am  speaking  of  are  substan- 
tial, direct,  and  palpable. 

Senator  STEWART.  Would  it  be  of  any  use  to  you  to  own  the  Sioux 
City  bridge? 

Mr.  COOMBS.  I  can  not  say  that  it  would  be  of  any  use. 

Senator  STEWART.  You  do  not  want  to  buy  it? 

Mr.  COOMBS.  No. 

Senator  BRIOE.  What  is  it  worth  ? 

Mr.  COOMBS.  Its  income  last  year  was  $15,700. 

Senator  BRICE.  How  much  is  it  worth? 

Mr.  COOMBS.  The  value  of  it  depends  on  whether  the  Missouri  Val- 
ley and  Blair  Bridge  Company  can  assert  an  independent  ownership  of 
the  bridge.  That  bridge  was  bonded  for  $1,500,000. 

Senator  BRICE.  What  would  it  cost  to  build  that  road  from  North 
Platte  to  Sioux  City. 

Mr.  COOMBS.  You  can  answer  that  question  better  than  I  can.  The 
Commission  of  1887  said  that  there  was  no  way  to  get  at  the  value  of 


80  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

the  bridge.  When  Mr.  Blair  was  asked  be  said  five  millions.  He  was 
asked  how  he  made  that  out,  and  he  said  because  that  much  stock  and 
bonds  were  issued  on  it.  If  there  ever  were  any  books  which  showed 
its  cost  they  have  been  burned.  Mr.  Pattison  assumed  its  cost  at 
$2,500,000. 

Senator  Morgan  pointed  to  certain  railroad  lines  marked  on  the  map 
and  asked  Mr.  Coombs  to  state  what  lines  they  were,  which  he  did. 
Pointing  to  the  Omaha  bridge,  he  asked  Mr.  Coombs  who  owned  it. 

Mr.  COOMBS.  The  Omaha  Bridge  Company  owns  it. 

Senator  MORGAN.  And  that  Omaha  Bridge  Company  is  under  the 
control  of  the  Union  Pacific? 

Mr.  COOMBS.  Yes. 

Senator  MORGAN.  And  the  bridge  is  operated  by  the  Union  Pacific? 

Mr.  COOMBS.  Yes. 

Senator  MORGAN.  If  the  Chicago  and  Northwestern  Company  could 
get  hold  of  that  bridge  would  it  have  both  bridges  across  the  Missouri 
River? 

Mr.  COOMBS.  Yes,  decidedly.  The  reorganization  committee  will 
accomplish  the  one,  and  Mr.  Littlers  plan  will  accomplish  the  other. 

Senator  STEWART.  Would  the  Sioux  City  bridge  be  of  any  value  to 
the  Union  Pacific! 

Mr.  COOMBS.  It  would  be  a  very  poor  way  out  for  the  Union  Pacific. 

Senator  STEWART.  Its  best  way  out  is  this  Omaha  bridge? 

Mr.  COOMBS.  The  Union  Pacific  system  was  built  for  Omaha.  There 
is  no  question  about  that. 

Senator  MORGAN.  And  if  we  sell  the  Sioux  City  bridge  we  will  have 
no  bridge  crossing  the  Missouri  Eiver? 

Mr.  COOMBS.  You  will  have  no  bridge  across  the  river  that  you 
own. 

The  CHAIRMAN.  You  mean  because  the  Union  Pacific  does  not  own 
the  Omaha  bridge? 

Mr.  COOMBS.  The  Union  Pacific  does  not  even  get  to  the  terminal  at 
Omaha. 

Senator  FRYE.  Have  you  ever  drafted  an  amendment  such  as  you 
require? 

Mr.  COOMBS.  I  drafted  an  amendment  to  the  bill  that  went  to  the 
House  last  year.  I  wish  this  committee  would  study  the  proposition 
between  water  haul  and  overland  haul.  That  is  the  great  proposition 
in  the  internal  trade  of  the  country  for  the  next  fifty  years.  It  is  so 
inconceivably  great  that  I  do  not  think  there  is  any  question  of  legis- 
lation before  this  Congress,  and  none  at  any  time  (I  mean  in  times  of 
peace)  which  will  be  of  such  momentous  consequence  to  the  people  of 
the  United  States,  as  the  direction  you  will  give  to  the  traffic  of  these 
great  lines  of  railway  and  to  the  lake  traffic.  You  all  know  the  vast 
interior  commerce,  sometimes  comparing  it  with  foreign  commerce.  It 
carries  iron  ore  to  the  mills  of  Virginia,  it  carries  the  coal  of  the  North, 
the  grain  of  the  West,  and  the  manufactures  of  the  East.  That  traffic 
is  not  evidence  of  great  gain,  and  great  prosperity,  and  great  power  so 
much  as  it  is  evidence  of  a  kind  of  domestic  economy.  It  does  the 
chores  of  the  day.  It  brings  the  fuel  from  the  west  slope  of  the  Alle- 
ghanies  and  sets  the  bread  from  the  wheat  of  Iowa  to  rise  for  the  New 
England  breakfast  table.  We  do  not  want  any  monopoly  which  will 
force  that  traffic  to  pay  high  rates  or  that  will  impede  it.  It  is  worthy 
the  power  and  consideration  of  the  Government  that  the  way  should 
be  kept  open,  and  everything  that  is  done  to  facilitate  it  will  be  a  great 
blessing. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  81 


STATEMENT  OF  MR.  LITTLER. 

Mr.  David  R.  Littler,  general  counsel  of  the  Chicago  and  Northwest- 
ern Railroad  Company,  rose  to  address  the  committee. 

Senator  BRICE.  What  is  the  value  of  this  Sioux  City  Eailroad  prop- 
erty? 

Mr.  LITTLER.  I  never  discussed  that  point. 

Senator  BRICE.  What  would  your  company  give  to  the  Government 
for  it? 

Mr.  LITTLER.  I  do  not  know. 

Senator  BRICE.  Will  you  consider  the  matter  and  make  a  proposi- 
tion in  case  we  agree  to  accept  a  lump  sum  rather  than  go  through  the 
form  of  appointing  a  commission? 

Mr.  LITTLER.  I  will  try  to  do  so. 

Senator  BRICE.  And  will  you  report  to  the  committee? 

Mr.  LITTLER.  I  will  try  to.  I  would  like  to  talk  about  three  minutes. 
I  have  been  greatly  entertained  and  somewhat  edified  by  the  lecture  on 
the  railroad  geography  of  the  United  States  delivered  by  the  distin- 
guished gentleman  who  has  just  taken  his  seat.  I  do  not  want  to  ques- 
tion his  knowledge  of  the  subject,  for  he  seems  to  be  entirely  familiar 
with  it,  but  I  want  to  bring  this  committee  back  to  earth  again,  and  I 
want  to  present  the  real  question  before  it  which  is  presented  in  the 
bill  no\v  under  consideration.  If  1  understand  the  burden  of  Mr. 
Coombs's  complaint  it  is  that  he  represents  a  lot  of  unfortunate  bankers 
who  put  their  money  in  Sioux  City — the  future  great  city  of  the  North- 
west. They  have  gone  and  made  a  bad  in  vestment  there,  and  lost  a  lot 
of  money,  and  Mr.  Coombs's  argument,  stripped  of  all  sophistry  and 
exposed  to  the  naked  light,  is  this:  He  asks  the  committee  to  have  the 
.  Government  build  a  railroad  on  that  dotted  line  |  indicating  on  the  map] 
250  miles  in  length,  and  he  asks  the  Government  to  subsidize  that  road 
to  the  amount  of  $5,000,000.  I  admire  him  for  his  modesty.  In  the 
first  place,  he  is  asking  at  least  $5,000  per  mile  more  than  it  would  cost 
to  build  the  road.  There  is  not  a  road  west  of  the  Missouri  River  up  to 
the  foothills  of  the  Rocky  Mountains  which  could  not  be  built  now  for 
$15,000  a  mile. 

The  CHAIRMAN.  You  should  make  some  allowance  for  equipment. 

Mr.  LITTLER.  I  am  talking  about  what  it  would  cost  to  construct 
the  road;  $15,000  a  mile  would  be  a  liberal  estimate  to  build  it,  and 
$20,000  a  mile  would  build  and  equip  it.  But  what  has  all  that  to  do 
with  the  question  before  the  committee?  Is  this  committee  going  to 
repeat  the  extravagance  and  questionable  legislation  which  led  to  the 
construction  of  a  line  of  railroads  between  the  Missouri  River  and  the 
Pacific  Ocean  during  the  war,  and  the  only  reason  given  for  which  was 
that  it  was  a  war  measure?  Is  this  committee  or  is  this  Congress 
going  to  invoke  the  war  power  of  the  Government  to  build  a  railroad 
250  miles  in  length  in  order  to  relieve  a  lot  of  Boston  bankers  who 
were  mistaken  in  their  estimate  of  the  improvement  and  advance  of 
Sioux  City?  That  is  the  question  now  before  the  committee. 

Now,  as  to  the  bill  under  consideration  and  as  to  the  insinuation 
which  has  been  made,  I  desire  to  reply  briefly.  The  learned  counsel 
intimated  that,  somewhere  along  the  line,  in  the  history  of  the  Chicago 
and  Northwest  Railroad  Company,  that  company  stole  or  plundered 
from  the  Sioux  City  road  a  lot  of  equipment  or  rolling  stock.  I  do  not 
know  whether  there  is  any  truth  in  it  or  not.  I  am  tolerably  well 
acquainted  with  a  number  of  the  gentlemen  connected  with  the  Chi- 
PR 6 


82  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

cago  and  Northwest  road,  and  they  have  not  the  reputation  of  being 
thieves.  I  do  not  believe  that  it  is  so.  But  let  us  assume  that  they 
have  stolen  the  property  of  the  Sioux  City  and  Pacific.  The  bill  under 
consideration  furnishes  to  the  Government  ample  opportunities  to 
recoup  the  Sioux  City  and  Pacific  for  that;  and  all  that  we  ask  is  that 
Mr.  Coombs  may  appear  before  the  commission  proposed  to  be  appointed 
by  Congress  and  make  his  statement  good.  We  assume  that  the  com- 
mission will  be  worthy  of  the  Congress  which  creates  it,  and  worthy  of 
the  President  of  the  United  States  who  appoints  it.  We  do  not  ask  to 
be  heard  in  the  appointment  of  that  commission.  We  simply  ask  that 
they  be  men  above  suspicion.  And  we  invite  you,  Mr.  Coombs,  to 
appear  there  and  make  good  your  insinuation  and  your  assertion  against 
the  gentlemen  whom  I  have  the  honor  to  represent.  And  if  you  shall 
show  that  commission  that  we  have  robbed  the  Sioux  City  Company  of 
its  property  we  will  make  reparation ;  and  we  will  expect  the  commis- 
sion to  add  to  the  value  of  the  Government  lien,  as  it  now  appears,  the 
value  of  the  property  converted  or  plundered.  I  am  perfectly  willing  to 
have  the  committee  amend  the  bill  in  any  way  that  will  perfect  it  and 
attain  the  ends  which  we  all  seek. 

Mr.  COOMBS.  If  what  I  said  when  speaking  rapidly  was  construed 
by  Mr.  Littler  into  a  charge  that  the  rolling  stock  of  the  Sioux  City 
and  Pacific  Company  had  been  dishonorably  acquired  by  anybody  1 
want  to  take  it  back. 

Mr.  LITTLER.  You  certainly  intimated  it  both  to-day  and  when  you 
spoke  a  week  ago. 

Mr.  COOMBS.  The  Fremont,  Elkhorn  and  Missouri  Valley  Railroad  was 
practically  consolidated  with  the  Sioux  City  and  Pacific,  but  could  not 
be  legally  consolidated  with  it  because  of  the  law,  and  the  Sioux  City  and 
Pacific  Eailroad,  as  I  understand  it,  and  as  I  stated,  did  furnish  the 
equipment  which  the  Fremont  and  Elkhorn  road  used. 

Mr.  LITTLER.  All  these  questions  are  questions  for  the  commission 
and  not  for  this  committee  5  and  I  ask  the  gentlemen  to  appear  before 
the  commission  instead  of  making  their  statements  to  the  committee. 
Mr.  Coombs  says  that  these  Pacific  railroads  are  managed  adroitly 
before  this  committee  and  that  this  little  bill  which  I  introduced  a  few 
weeks  ago  is  but  the  forerunner  of  another  bill,  and  is  a  part  of  the 
combination,  the  other  bill  having  been  unfolded  here  to-day  in  the 
presentation  of  the  reorganization  committee's  proposition.  I  want  to 
state  here  to  day  (and  I  call  upon  the  counsel  for  the  Union  Pacific  and 
upon  Mr.  Huntingdon  to  say  whether  I  am  not  telling  the  truth  when 
I  say)  that,  without  consultation  writh  either  the  Central  Pacific  or  the 
Union  Pacific,  I  drew  up  this  bill  as  counsel  for  the  Chicago  and  North- 
western road  and  presented  it  on  its  own  merits.  I  wish  it  disconnected 
from  any  scheme  which  may  embrace  the  settlement  of  those  other  cor- 
porations. I  do  not  represent  them  directly  or  indirectly,  and  I  do  not 
wish  any  intimation  that  there  is  any  combination  here  in  order  to  carry 
forward  either  of  the  schemes.  I  am  willing  that  every  tub  should 
stand  on  its  own  bottom. 

Senator  STEWART.  What  have  you  to  say  to  Mr.  Coombs's  suggestion 
that,  by  disposing  of  the  Sioux  City  road,  the  Government  may  cut  itself 
off  from  any  eastern  outlet? 

Mr.  LITTLER.  I  do  not  think  there  is  anything  in  it.  The  most  com- 
plete eastern  outlet  to  the  west  is  the  Omaha  bridge,  and  that  is  all 
sufficient.  It  is  in  the  direct  line  between  the  East  and  West,  and  there 
is  no  sense  in  talking  about  cornering  the  Government  or  tile  i/uioii 
Pacific  by  the  Blair  bridge,  or  by  any  other  bridge.  The  law  of  com- 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  83 

petition  is  sufficient  to  answer  that  question.  If  a  time  comes  wlien 
another  bridge  is  needed  across  the  Missouri  River,  the  money  to  build 
it  will  be  forthcoming. 

The  CHAIRMAN.  Do  you  know  the  distance  from  Omaha  to  Duluth? 

Mr.  LITTLER.  No,  sir ;  I  am  not  acquainted  with  the  railroad  geog- 
raphy like  iny  friend  Mr.  Coombs. 

CENTRAL  PACIFIC. 

STATEMENT  OF  MR.  C.  P.  HUNTINGTON— Continued. 

Mr.  Collis  P.  Huntiugton,  president  of  the  Southern  Pacific  Kail- 
road,  appeared  again  before  the  committee  at  the  suggestion  of  Sena- 
tor Morgan.  He  was  duly  sworn  by  the  chairman. 

Mr.  Huntiugton  said: 

Mr.  CHAIRMAN  AND  GENTLEMEN  or  THE  COMMITTEE  :  I  have  placed 
upon  paper  some  things  which  I  desire  to  say,  and  I  have  no  doubt 
that  I  will  repeat  some  things  which  1  said  before  on  the  same  line  of 
argument. 

1  come  before  you  again,  not  to  argue  the  case,  or  perhaps  to  say  any- 
thing new,  as  it  is  the  same  old  subject  on  which  you  have  heard  me 
before,  and,  that  being  so,  I  may  to  some  considerable  extent  repeat 
what  I  have  already  said. 

When  these  roads  were  built  everybody  wanted  them.  They 
were  commenced— particularly  the  Central  Pacific  (which  was  begun 
a  year  or  two  before  any  of  the  others  built  under  the  acts  of  1862 
or  1864) — when  everything  was  very  high  in  price.  Many  of  our  iron 
rails  cost  1 140  a  ton  laid  in  the  track.  These  have  all  been  replaced 
by  steel,  which  now  can  be  bought  for  about  $30,  and  they  have  some 
six  or  eight  times  the  wear  that  the  iron  had.  For  many  of  our  loco- 
motives we  paid  from  $20,000  to  $32,500  apiece.  Just  such  engines 
can  be  bought  now  for  from  $5,000  to  $8,000.  The  freight  on  them 
then — as  it  .was  on  all  material  which  had  to  be  sent  around  Cape 
Horn — was  three  times  what  it  is  now,  with  very  high  insurance. 
Labor  was  high,  and  that  and  all  material  used  in  the  construction  of 
the  road,  except  what  was  bought  on  the  Atlantic  Coast,  was  paid  for 
in  gold.  The  material  bought  in  California  included  vast  quantities 
of  lumber,  as  many  of  the  very  deep  arroyas  or  canyons  were  spanned 
by  timber  trestles,  all  of  which  were  removed  later,  so  that  now  ths 
trains  pass  over  solid  banks  or  steel  and  iron  bridges.  All  of  this 
material  had  to  be  paid  for  in  gold,  for  some  of  which  we  had  to  pay 
as  high  as  $2.20  in  currency  for  each  dollar  in  gold. 

When  the  Central  Pacific  Railroad  was  built,  it  was  thought  that  the 
people  who  embarked  their  money  and  their  time  in  it  were  taking  great 
risks.  Many  of  the  men  in  New  York  and  Boston  of  large  means  I 
endeavored  to  get  to  join  us  in  the  building  of  the  road,  but  no  one  was 
willing  to  join  us  in  the  undertaking.  Such  men  as  Moses  Taylor,  Wil- 
liam E.  Dodge,  Commodore  Garrison,  and  many  others,  I  spent  hours  with 
in  the  endeavor  to  induce  them  to  take  an  interest,  and  the  reply  made 
by  Commodore  Garrison  was  in  about  the  words  in  which  they  all 
answered:  "Huntington,  the  risk  is  too  great,  and  the  profits,  if  any, 
are  too  remote.  We  can  not  take  the  risk."  I  called  upon  very  many 
of  the  rich  men  of  California,  like  D.  O.  Mills,  Eugene  Kelly,  John 
Parrott,  and  others,  but  none  of  them  would  join  us,  some  saying  the 
risks  were  too  great,  and  others  that  we  were  crazy.  All  the  people  of 
California,  however,  wanted  the  road;  the  Government  wanted  it,  and 


84  GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

all  those  in  the  East  who  had  friends  in  California  wanted  it,  so  that 
each  could  go  to  the  other  without  the  inconveniences  and  hardships  of 
the  long  and  tedious  sea  voyage.  Finally,  the  work  was  done,  and  all 
said  then  that  it  was  well  done. 

I  can  truly  say  that,  when  the  Central  Pacific  was  completed,  the 
value  of  all  the  assets  that  the  builders  had  was  not  sufficient  to  pay 
the  debts  created  in  doing  the  work  by  several  millions  of  dollars.  That 
debt  was  carried  for  a  long  time,  until  values  appreciated;  then  the 
shares  and  other  assets  were  sold  and  the  debt  was  paid.  After  the  road 
was  completed,  before  it  could  be  operated  in  the  winter,  on  account  of 
the  snowstorms  in  the  Sierra  Nevada  Mountains,  some  40  miles  of  the 
line  had  to  be  covered.  It  may  be  said  that  a  building  had  to  be  put 
over  the  track,  and  in  some  places  galleries  had  to  be  built  for  many 
miles  at  an  expense  of  say  $50,000  a  mile,  as  it  was  necessary  to  build 
them  of  enormous  strength  to  withstand  the  terrible  avalanches  of  snow 
and  rocks  which  passed  over  them  and  which  have  been  passing  over 
them  nearly  every  winter  since.  The  road  has  accommodated  thousands 
of  people  and,  I  think,  has  harmed  no  one.  In  order  to  be  able  to  give 
the  committee  some  idea  of  the  magnitude  of  this  snow-shed  construc- 
tion I  telegraphed  to  our  people  in  San  Francisco  for  definite  information 
and  have  received  the  following  reply: 

Lumber  used  in  original  construction  of  snow  sheds,  65,000,000  feet,  board  measure. 
No  record  preserved  of  lumber  actually  used  in  repairs.  Total  cost  of  snow-shed 
repairs  from  1873  to  date,  $2,241,000.  Divide  this  by  $17,  average  actual  cost,  and 
we  have  an  approximate  estimate  for  repairs  and  renewals  to  date,  131,800,000  feet, 
board  measure,  making  a  total  for  construction  and  repairs  to  date,  196,800,000  feet, 
board  measure. 

By  the  experience  obtained  in  the  building  of  this  road  the  builders 
went  on  and  built  other  roads,  and  in  all  places  where  they  have  built 
land  has  appreciated  enormously.  Land  which  was  selling  at  $2  an 
acre  is  now  worth  $30,  $40,  $80,  and  in  some  places  even  $100  an  acre, 
and  probably  there  is  no  section  through  which  the  road  was  built, 
where  the  laud  was  good  for  anything  that  has  not  increased  in  value 
more  than  100  per  cent. 

The  Central  Pacific  since  its  completion — and  before,  I  believe — has, 
under  the  acts  under  which  it  was  constructed,  not  only  fulfilled  all  its 
requirements  but  has  had  no  trouble — neither  has  the  Government — 
with  the  Indians  through  whose  reservations  we  passed.  The  Piutes, 
a  very  powerful  tribe,  were,  before  the  road  was  built,  at  war  with  the 
whites,  but  when  the  road  was  completed  that  trouble  ceased,  and  the 
Central  Pacific,  I  think,  is  entitled  to  the  credit  of  its  discontinuance. 

We  have  kept  the  road  in  fine  physical  condition,  and  I  believe  it  is  one 
of  the  best-equipped  roads  for  what  it  has  to  do  in  the  whole  country. 
I  believe  it  could  to-day  do  twice  the  business  that  is  done  on  all  the 
transcontinental  lines  without  any  inconvenience,  and  that  is  one  reason 
why  the  company  is  to-day  unable  to  pay  the  Government  what  it  owes; 
that  is,  because  of  the  small  tonnage  and  low  rates.  The  cutting  of 
rates,  the  small  tonnage,  and  the  dividing  of  it  between  the  overland 
lines  has  brought  most  of  the  other  roads  into  bankruptcy  and  made  it 
impossible  for  the  Central  Pacific  to  pay  its  great  debt  when  due;  but 
with  a  reasonable  extension  of  time  it  can  and  will  pay  every  dollar  of 
it,  principal  and  accrued  interest,  and,  while  this  principal  amount  is 
being  regularly  and  gradually  extinguished,  the  company  will  be  paying 
as  much  interest  currently  as  I  think  the  Government  would  have  to 
pay  if  it  wished  to  borrow  money  on  a  long  bond. 

I  believe  few  thought  that  when  this  road  was  built  there  would  be 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  85 

any  other  transcontinental  railroad  for  many  years;  but  it  was  hardly 
completed  before  the  Government  gave  to  the  road  immediately  north 
of  it  a  subsidy  in  land  larger  than  the  value  of  the  lands  and  bonds 
that  the  Central  road  received;  and  south  of  it  another  road  was  char- 
tered, and  to  this  the  Government  gave  as  large  a  grant  of  land  as  to 
the  one  north  of  us.  Now,  with  the  experience  the  Government  had 
with  the  Central — seeing  its  workings  and  how  it  policed  the  whole 
country,  saving  almost  entirely  the  many  millions  it  Avas  costing  the 
Government  for  taking  care  of  the  country  before  the  Central  was 
built — it  was  probably  wise  to  .do  what  it  did  in  giving  these  large 
grants  to  the  other  roads,  as  they  would  reasonably  expect  the  same 
results  with  them  as  they  had  seen  on  the  Central  line. 

Therefore,  I  think  no  one  questions  the  wisdom  of  the  sovereign  power 
in  doing  what  was  done,  even  if  it  received  nothing  from  the  bond-aided 
roads  other  than  this  great  service  that  has  been  rendered  and  is  being 
rendered  and  will  no  doubt  continue  to  be  rendered  for  all  time;  for  the 
country  through  which  the  roads  were  built  was  for  much  of  the  way 
too  poor  for  civilized  man's  abiding  place;  yet  the  railroad  must  for  its 
own  sake  watch  over  and  police  it  for  the  protectioTi  of  its  own  property. 
The  land  grant  that  the  Central  Pacific  Eailroad  Company  received 
was  very  small  in  value.  There  were  many  good  lands  in  California, 
but  they  were  all,  or  nearly  all,  taken  up  by  Spanish  grants.  The 
lands  which  the  company  received  were  nearly  all  in  the  Sierra  Nevada 
Mountains  and  in  Utah  and  Nevada.  I  think  most  of  the  members  of 
this  committee  know  the  value — or,  I  might  say  lack  of  value — of  those 
lands,  and  I  think  no  one  will  question  but  that  the  half  with  the  rail- 
road is  worth  much  more  than  the  whole  was  without  it. 

Some  criticism  of  the  Central  Pacific  has  recently  been  made  by  men 
who,  I  believe,  stand  very  well  in  the  community,  who  charge  that  the 
Central  Pacific  has  not  done  its  whole  duty  toward  its  railroad  connec- 
tions, particularly  the  Union  Pacific.  They  claim,  for  instance,  that 
the  Union  Pacific  Company  were  compelled  to  build  branches  at  the 
west  end  of  the  road  in  order  to  take  the  business  that  the  Central 
Pacific  would  not  do;  but  the  facts  show  that  such  criticism  is  unjust 
and  that  the  charge  has  no  basis. 

I  asked  Mr.  J.  C.  Stubbs,  the  head  of  the  traffic  department,  how  this 
was,  and  without  reading  his  letter,  which  is  too  voluminous,  I  will  leave 
it  with  you,  requesting  its  careful  consideration;  but  I  shall  ask  you  to 
be  patient  with  me  while  I  quote  its  salient  points: 

(1)  Mr.  Coombs  charges  that  almost  from  the  beginning  of  the  opera- 
tion of  the  Union  and  Central  Pacific  railroads  there  has  been  a  lack  of 
cooperation  between  them,  and  that  the  present  deplorable  condition  of 
both  roads  has  been  brought  about  by  a  violation  of  the  understanding, 
at  the  time  Congress  gave  its  aid,  that  the  various  roads  were  to  form 
a  continuous  line,  working  in  harmony. 

In  the  first  place,  the  question  of  revenue  had  little,  if  any,  influence 
upon  the  minds  of  Congress  in  granting  the  aid;  for  at  that  time  the 
mining  industry  was  all  that  promised  traffic,  and  mining  produced  little 
tonnage.  The  later  development  of  agriculture  was  undreamed  of  then. 
What  the  Government  wanted  Was  a  line  across  the  continent  for  the 
quick  transportation  of  troops  and  supplies,  and  to  enable  the  territory 
inhabited  by  Indians  to  be  policed.  With  respect  to  the  through  trans- 
continental traffic,  there  was  from  the  beginning  the  heartiest  and  most 
effective  cooperation  between  the  two  companies.  The  Union  Pacific 
absolutely  controlled  the  west-bound  business,  which  was  of  much 
greater  importance  than  the  east-bound,  until  1883,  when  other  Hues, 


86  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

through  no  motion  of  the  Central  Pacific,  made  connection  with  it  at 
Ogden. 

(2)  Mr.  Coombs  says  that,  for  the  last  ten  years,  the  Central  Pacific 
has  been  nnder  the  full  control  of  the  Southern  Pacific,  and  that  the 
Union  has  been  absolutely  at  its  mercy  in  the  matter  of  through  pas- 
senger and  freight  train* c. 

Now,  the  Union  Pacific  has  been  in  no  degree  at  the  mercy  of  either 
the  Central  or  the  Southern,  for  they  had  no  more  voice  in  the  control 
of  the  traffic  than  the  Union  Pacific,  or  any  other  company  whose  road 
made  a  part  of  the  through  line  between  the  Missouri  River  and  the 
Pacific  Coast.  On  the  question  of  the  effect  of  competition  for  tli  e  through 
traffic  of  the  Central  Pacific,  and  as  illustrating  the  various  influences 
which  have  operated  in  the  diversion  of  traffic  from  the  Union,  I  ask 
the  patience  of  the  committee  in  examining  this  map,  which  shows  in 
prominent  colors  the  roads  which  compete  for  California  traffic.  The 
Union  Pacific  and  its  ally,  the  Chicago  and  Northwestern,  are  shown  in 
red ;  the  Central  in  yellow ;  the  Southern  Pacific  in  green.  All  the  lines 
which  are  competitive  with  the  Union  and  Southern  Pacific  are  shown 
in  blue.  The  lines  between  the  Missouri  River  and  Chicago  which  are 
neutral  as  between  the  Union  Pacific  and  its  competitors  west  of  the 
river  are  shown  in  green.  No  intelligent  man,  after  examining  it,  can 
justly  say  that  the  competition  of  the  Southern  Pacific,  by  reason  of 
leasing  the  Central,  exercises  the  major  influence  in  diverting  traffic 
from  the  Union  Pacific;  nor  can  it  be  said  that  the  diversion  of  Califor- 
nia traffic  from  the  Union  Pacific  exercised  the  greater  influence  in 
bringing  about  its  present  distressed  condition. 

The  lines  competing  for  the  through  traffic  are,  in  the  order  of  their 
opening  for  business,  the  Union  Pacific,  connecting  at  Ogden;  the 
Atchison,  connecting  with  the  Southern  Pacific  at  Deming;  the  Texas 
and  Pacific,  connecting  with  the  Southern  at  El  Paso;  the  Sunset 
Route,  connecting  with  the  Southern  Pacific  at  El  Paso;  the  Denver 
and  Rio  Grande  and  Rio  Grande  Western,  the  Burlington  and  Missouri 
River,  the  Chicago,  Rock  Island  and  Pacific,  the  Atchison,  Topeka  and 
Santa  Fe,  and  the  Missouri  Pacific — all  connecting  with  the  Central 
Pacific  at  Ogden;  the  Northern  Pacific,  connecting  with  the  Central 
Pacific  at  Portland;  the  Atchison,  connecting  with  the  Southern 
through  the  Atlantic  and  Pacific  at  Mojave,  Cal.,  with  the  right  to  run 
its  trains  on  the  Southern  Pacific  through  to  San  Francisco,  if  it  wishes 
to  run  them,  and  operating  its  own  line  through  to  Los  Angeles  and 
San  Diego;  the  Union  Pacific  and  Oregon  Short  Line,  connecting  with 
the  Southern  through  the  Oregon  Railway  and  Navigation  Company  at 
Portland ;  the  Canadian  Pacific,  in  connection  with  the  Pacific  Coast 
Steamship  Company,  running  steamers  between  Vancouver  and  San 
Francisco,  and  which  also  connects  with  the  Northern  Pacific,  and 
through  it  and  the  line  operated  by  the  Central  Pacific  from  Portland, 
reaching  all  California  points;  and,  finally,  the  Great  Northern,  which 
connects  with  the  Central  Pacific  at  Portland. 

Senator  STEWART.  Have  those  roads  a  right  to  make  rates  to  San 
Francisco  f 

Mr.  HUNTINGTON.  Yes. 

Senator  STEWART.  Without  the  consent  of  the  Southern  Pacific? 

Mr.  HUNTINGDON.  Yes;  we  all  agree  upon  rates.  The  Atchison 
showed  $7,000,000  of  unpaid  rebates  for  getting  business. 

Senator  STEWART.  Have  these  other  roads  the  power  to  fix  the  rates 
if  you  dissent? 

Mr.  HUNTINGTON.  We  made  arrangements  with  them  long  years  ago 
merely  that  we  prorate. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  87 

The  CHAIRMAN.  The  road  at  the  point  of  shipment  makes  the  rate, 
and  you  accept  it  pro  rata? 

Mr.  HUNTINGTON.  Yes;  the  Central  Pacific  is  probably  the  most 
liberal  road  in  the  United  States — or  rather  the  Southern  Pacific. 

Of  the  through  freight  passing  to  and  from  the  Pacific  Coast  over 
the  various  lines  operated  in  whole  or  in  i>art  by  the  Central  Pacific  or 
Southern  Pacific  during  the  ten  years  ending  with  1892,  the  Central 
Pacific  (Ogden  Line)  carried  54  per  cent  against  4G  per  cent  carried  by 
the  other  lines,  while  of  the  passenger  traffic  for  the  same  period  it 
carried  over  58  per  cent  against  all  the  other  lines. 

Senator  MORGAN.  Up  to  what  time  was  that! 

Mr.  HUNTINGTON.  That  was  during  the  ten  years  ending  in  1892. 

Senator  WOLCOTT.  Was  that  west-bound  business? 

Mr.  HUNTINGTON.  East  and  west.  The  Union  Pacific  made  all  the 
west-bound  rates. 

During  the  first  two  years  of  this  period,  all  these  lines  were  oper- 
ated by  the  Central  Pacific,  and  for  the  remaining  eight  years  by  the 
Southern,  and  in  these  two  years  the  percentages  carried  by  the  Ogden 
Line  were,  for  freight,  55  per  cent,  and  for  passenger,  62  per  cent. 
Since  then  the  Northern  Pacific,  the  Atlantic  and  Pacific,  the  Canadian 
Pacific,  and  the  Southern  California  roads  have  become  factors;  but  it 
seems  to  me  that  this  fine  showing  for  the  Central  Pacific  gives  us  the 
right  to  claim  that  it  has  been  accomplished  by  reason  of  the  common 
control  of  both  the  Central  and  Southern  Pacific  lines. 

In  corroboration  of  the  above,  let  me  say  that  in  1885  the  Transcon- 
tinental Association,  composed  of  all  the  railroad  companies  interested 
in  the  Pacific  Coast  traffic  with  the  East  (to  which  Mr.  Coombs  gener- 
ally refers),  agreed  to  pool  the  traffic,  and,  being  unable  to  agree  upon 
the  allotment,  left  it  to  a  board  of  eminent  and  practical  railroad  men, 
with  the  result  that,  after  having  heard  the  claims  of  all  parties,  they 
made  the  following  award: 

Passenger  traffic:  .  Percent. 

To  the  Ogden  lines 61 

To  the  other  lines 39 

Freight  traffic: 

To  the  Ogden  lines 51 

To  the  other  lines ^ 49 

As  to  the  competition  of  the  Southern  Pacific  Railroad,  which  is  used 
by  the  Union  Pacific  officials  as  an  excuse  for  their  greatest  loss,  the 
records  show  that  the  Sunset  Route — that  is,  the  steamship  and  rail 
line  between  New  York  and  San  Francisco  via  New  Orleans — partici- 
pates in  very  little  traffic  which  might  be  directed  over  the  Ogden  lines, 
except  traffic  interchanged  by  California  with  the  Atlantic  seaboard, 
and  the  sum  of  that  traffic  is  but  20  per  cent  of  the  total  traffic  inter- 
changed by  California  with  United  States  territory  on  the  east  of  the 
Missouri  River,  and  a  portion  of  that  is  taken  from  the  Panama  and 
Cape  Horn  routes  at  rates  so  low  that  the  all-rail  transcontinental  lines 
do  not  care  to  compete  for  it. 

The  CHAIRMAN.  You  take  it  by  virtue  of  your  lower  rates  ? 

Mr.  HUNTINGTON.  Yes;  we  take  it  by  figuring  our  rates  on  merely 
paying  expenses.  We  take  it  at  rates  that  would  have  bankrupted  the 
road  if  all  freights  were  taken  at  the  same  rates.  We  figured  out  the 
train  expenses,  and  took  it  at  something  over  those  expenses.  You 
have  got  four  men  upon  a  train,  two  brakemen  and  stoker,  and  there  is 
oil  and  fuel  and  waste  and  wear;  so  that  we  calculated  that  if  we  could 
make  $50  on  the  whole  train  we  would  take  freight  at  those  rates. 


88  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

The  CHAIRMAN.  You  had  water  rates  from  New  York  to  New  Orleans, 
and  then  the  rates  on  your  line  ? 

Mr.  HUNTINGDON.  Yes. 

The  CHAIRMAN.  And  you  took  freight  at  those  rates  for  the  purpose 
of  adding  to  your  business  at  a  very  small  profit  rather  than  not  take 
it  at  all? 

Mr.  HUNTINGDON.  We  took  it  at  rates  throwing  out  the  account  of 
interest,  taxes,  superintendence,  etc. — everything  but  the  mere  train 
expenses. 

The  CHAIRMAN.  You  took  it  on  the  general  principle  that  you  would 
increase  your  business  if  you  could,  even  at  a  small  profit? 

Mr.  HUNTINGTON.  Yes;  but  we  could  only  do  it  on  account  of  cheap 
water  rates.  It  seemed  that  we  could  make  a  little  over  the  cost  of 
movement. 

Senator  STEWART.  That  did  not  reach  freight  in  the  interior  States? 

Mr.  HUNTINGTON.  No  5  only  what  lies  upon  tide  water. 

Senator  MORGAN.  What  did  you  give  to  the  Panama  Railroad  under 
that  arrangement1? 

Mr.  HUNTINGTON.  We  have  not  had  any  arrangement  with  the  Pan- 
ama Eailroad  for  several  years. 

The  CHAIRMAN.  Well,  when  you  did  have  it? 

Mr.  HUNTINGTON.  The  Interstate  Commerce  Committee  has  a  copy 
of  the  contract  which  we  made  with  the  Panama  road. 

Senator  WOLCOTT.  Will  you  file  with  the  committee  a  full  statement 
of  your  tonnage  and  freight  rates? 

Mr.  HUNTINGTON.  Yes,  I  will  do  so. 

Senator  MORGAN.  How  long  did  that  Panama  contract  continue? 

Mr.  HUNTINGTON.  I  do  not  recollect.  I  think  it  was  subject  to  six 
months'  notice. 

Senator  MORGAN.  How  long  was  it  actually  in  operation? 

Mr.  HUNTINGTON.  I  do  not  know;  I  should  think  four  or  five  or  six 
years  j  it  may  have  been  more. 

Senator  MORGAN.  State  your  recollection  of  the  substance  of  that 
arrangement. 

Mr.  HUNTINGTON.  I  will  send  a  copy  of  the  contract  to  the  com- 
mittee. 

Senator  MORGAN.  I  would  like  to  have  it  now. 

Mr.  HUNTINGTON.  I  haven't  got  it  and  I  can  hardly  tell  what  it  was. 
My  impression  is  that  we  gave  the  Panama  Eailroad  Company  $70,000 
a  month  for  so  much  space  in  three  steamers — running  from  $60,000  to 
$100,000. 

Senator  MORGAN.  You  bought  the  space,  whatever  it  was,  in  the 
three  steamers  at  so  much  a  month? 

Mr.  HUNTINGTON.  We  hired  so  much  space. 

Senator  MORGAN.  At  the  rate  of  $75,000  or  $100,000  per  mouth? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Whether  you  filled  that  space  with  freights  or  not 
made  no  difference? 

Mr.  HUNTINGTON.  I  think  we  did  fill  it.    We  calculated  to  fill  it. 

Senator  MORGAN.  It  made  no  difference  in  the  agreement,  though, 
whether  you  actually  sent  freights  on  the  steamships? 

Mr.  HUNTINGTON.  My  impression  is  that  we  hired  so  much  space, 
expecting  to  fill  it. 

Senator  MORGAN.  About  how  much  was  that  space  in  proportion  to 
the  carrying  capacity  of  the  steamship? 

Mr.  HUNTINGTON.  I  think  it  was  about  6  tons. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  89 

Senator  MORGAN.  How  would  that  compare  with  the  capacity  of  the 
ships'? 

Mr.  HUNTINGTON.  My  impression  is  that  the  ships  ran  from  1,500  to 
2,500  tons. 

Senator  MORGAN.  Inside  or  outside  measurement? 

Mr.  HUNTINGTON.  What  we  would  call  net  tonnage.  The  gross  ton- 
nage is  what  the  whole  will  carry,  and  then  they  put  the  engines  and 
machinery  in  and  the  balance  is  called  the  net  tonnage. 

Senator  MORGAN.  And  you  say  that  the  net  tonnage  of  the  steamers 
was  from  1,500  to  2,000  tons? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  You  are  not  certain  about  that! 

Mr.  HUNTINGTON.  It  is  very  difficult  to  carry  those  things  in  one's 
mind,  but  the  fact  is  easily  ascertained. 

Senator  MORGAN.  To  the  extent  that  you  thus  obtained  and  monop- 
olized the  capacity  of  these  ships,  to  that  same  extent  you  shut  out  the 
people  of  California,  Oregon,  and  Washington  from  occupying  these 
ships  with  their  freight? 

Mr.  HUNTINGTON.  We  carried  their  goods  all  together. 

Senator  MORGAN.  To  the  extent  that  you  monopolized  the  freight 
capacity  on  these  ships,  you  shut  out  the  right  of  the  people  of  Cali- 
fornia, Oregon,  and  Washington  to  send  their  freight  on  those  vessels? 

Mr.  HUNTINGTON.  Of  course,  if  we  hired  the  tonnage,  I  suppose 
they  could  not  double  it  on  the  same  vessel. 

Senator  MORGAN.  So  that  what  you  meant  to  haul  to  the  Pacific 
Ocean  was  space  and  not  freight? 

Mr.  HUNTINGTON.  We  meant  to  haul  freight.  The  object  was  this: 
We  wanted  to  get  a  certain  price  for  carrying  goods.  If  they  cut  rates 
very  much  they  would  run  into  bankruptcy,  and  it  is  always  unfortu- 
nate for  capital  to  be  wasted.  Most  of  the  overland  lines  have  gone 
into  bankruptcy,  and  it  seems  to  be  more  wise  in  business  matters  to 
agree  to  something  which  will  give  a  fair  return  on  the  capital 
invested. 

Senator  MORGAN.  I  want  to  know  why  it  was  that  the  people  of  Cali- 
fornia and  of  the  whole  Pacific  Coast  were  in  this  way  deprived  of  the 
opportunity  of  having  the  advantage  of  this  line  of  steamers  in  carrying 
their  freight  to  and  from  New  York. 

Mr.  HUNTINGTON.  I  do  not  see  exactly  how  they  were.  As  I  say, 
there  is  nothing  covered  up  by  it.  We  sent  a  copy  of  the  contract  to 
the  Interstate  Commerce  Commission.  It  was  a  thing  which  was 
admitted.  It  gave  the  Panama  Company  some  little  thing  so  that  it 
could  continue  its  line  without  running  into  bankruptcy. 

Senator  MORGAN.  WTho  were  the  owners  of  this  steamship  line? 

Mr.  HUNTINGTON.  The  Pacific  Mail. 

Senator  MORGAN.  Who  were  the  owners  of  the  Pacific  Mail! 

Mr.  HUNTINGTON.  Its  stockholders. 

Senator  MORGAN.  Who  were  its  stockholders? 

Mr.  HUNTINGTON.  I  can  not  tell  you ;  there  are  a  great  many  of  them. 
I  have  none  of  the  stock. 

Senator  MORGAN.  Does  the  company  which  you  represent  have  any 
stock  of  the  Pacific  Mail? 

Mr.  HUNTINGTON.  No;  I  think  not.  The  Central  Pacific  did  not 
have  any  and  1  do  not  think  the  Union  Pacific  had. 

Senator  MORGAN.  Do  the  owners  of  the  Southern  Pacific  own  stock 
in  it? 

Mr.  HUNTINGTON.  No. 


90  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Where  was  the  stock  of  the  Pacific  Mail  owned 
chiefly  ? 

Mr.  HUNTINGDON.  I  should  think  it  was  owned  in  New  York.  The 
stock  is  sold  there  every  day. 

Senator  MORGAN.  What  companies  were  represented  in  that  arrange- 
ment you  have  spoken  of? 

Mr.  HUNTINGTON.  I  think  that  all  the  overland  railroad  companies 
were  represented. 

Senator  MORGAN.  Name  them. 

Mr.  HUNTINGTON.  I  should  say  the  Northern  Pacific,  the  Great 
Northern,  the  Union  Pacific,  the  Central  Pacific,  the  Southern  Pacific, 
the  Atchison,  and  the  Texas  Pacific,  and  perhaps  some  others. 

Senator  MORGAN.  They  were  all  parties  to  this  agreement  for  the 
purchase  of  the  tonnage  of  this  steamship  line! 

Mr.  HUNTINGTON.  For  the  purchasing  of  space. 

Senator  MORGAN.  Was  not  the  purpose  of  that  agreement  that 
freights  which  would  otherwise  have  gone  by  sea  would  go  by  the 
overland  railroads? 

Mr.  HUNTINGTON.  No;  I  think  that  the  object  was  naturally  to  get 
prices  of  freight  steady  so  that  bankruptcy  could  be  kept  off.  I  think 
that  was  the  object  of  it. 

Senator  MORGAN.  But  in  order  to  keep  out  of  bankruptcy,  was  it  not 
deemed  necessary  to  force  the  freights  into  the  railroad  lines  instead 
of  permitting  them  to  go  by  water? 

Mr.  HUNTINGTON.  No;  we  always  filled  the  space. 

Senator  MORGAN.  Are  you  sure  of  that? 

Mr.  HUNTINGTON.  1  do  not  know  that  we  aways  did  it.  I  know  that 
it  was  calculated  we  would  fill  the  space. 

Senator  MORGAN.  What  arrangement  had  you  at  the  same  time  with 
the  Panama  Railroad  Company? 

Mr.  HUNTINGTON.  It  was  the  one  arrangement.  Whatever  was  done 
was  done  in  the  joint  interest  of  the  Panama  Railroad  and  the  Pacific 
Mail. 

Senator  MORGAN.  Did  the  Panama  Railroad  own  the  steamship 
line? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  What  did  the  Panama  Railroad  get  out  of  that 
contract  ? 

Mr.  HUNTINGTON.  It  got  a  certain  percentage. 

Senator  MORGAN.  What  was  it? 

Mr.  HUNTINGTON.  The  same  as  it  had  upon  the  through  traffic,  and 
the  same  as  it  gets  now  on  the  through  traffic — 55  per  cent  from  New 
York  to  Panama.  The  Pacific  Mail  does  not  run  steamers  on  this  side 
now. 

Senator  MORGAN.  What  difference  was  made  in  freights  under  this 
arrangement  between  the  freights  shipped  under  your  contract  and 
those  shipped  by  the  people  at  large? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  There  was  some  contract,  was  there  not,  about  dif- 
ferentiating the  rates? 

Mr.  HUNTINGTON.  I  do  not  know  whether  there  was  or  not. 

Senator  MORGAN.  Was  there  not  a  great  difference  in  regard  to  the 
freights  carried  by  the  Panama  Railroad  under  your  contract? 

Mr.  HUNTINGTON.  I  have  no  doubt  there  was. 

Senator  MORGAN.  And  you  do  not  know  them? 

Mr.  HUNTINGTON.  I  must  have  seen  the  contract. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  91 

Senator  MORGAN,  I  would  like  to  have  a  full  and  frank  statement 
about  that. 

Senator  FRYE.  Mr.  Huntington  has  offered  to  produce  the  contract 
itself,  and  I  submit  that  he  is  not  to  be  cross-examined  about  facts 
which  are  contained  in  a  contract  that  was  in  writing  when  his  memory 
does  not  extend  to  them. 

Senator  MORGAN.  Then  the  examination  is  not  to  close  until  the 
contract  is  produced  ? 

The  CHAIRMAN.  If  the  contract  will  show  the  rates  that  would  be 
the  best  evidence. 

Mr.  HUNTINGTON.  If  I  were  in  my  office  I  could  produce  the  con- 
tract. 

The  CHAIRMAN.  The  contract  does  show  the  rates? 

Mr.  HUNTINGTON.  I  have  no  doubt  it  does. 

Senator  MORGAN.  I  am  not  disposed  to  accept  the  statement  that 
the  contract  does  show  that.  At  all  events,  I  shall  try  to  exercise  my 
right  to  cross-examine  the  witness  on  the  contract  when  he  produces  it. 

The  CHAIRMAN.  The  point  which  Mr.  Frye  wants  to  make  is  that 
the  contract  ought  to  be  the  basis  of  the  examination,  and  that  Mr. 
Huntington  should  be  able  to  refresh  his  memory  by  looking  at  it. 

Mr.  HUNTINGTON.  I  should  like  the  Senator  to  have  everything  con- 
nected with  the  contract  and  everything  I  know  about  it. 

Senator  MORGAN.  Mr.  Huntington  did  not  expect  that  no  question 
would  be  asked  about  this  contract,  and  he  should  have  been  prepared 
to  answer  the  questions. 

The  chairman  directed  Mr.  Huntington  to  produce  the  contract  when 
he  comes  next  before  the  committee. 

Mr.  HUNTINGTON  (3).  Mr.  Coombs  says  it  is  currently  reported  in 
California  that  compulsion  is  brought  to  bear  upon  shippers  who  wish 
to  ship  over  the  Central  line  to  force  them  to  ship  by  the  Southern. 

Outside  of  the  fact  that  rumor  is  a  bad  argument  in  itself,  let  me  say 
at  once  that  this  charge  is  false,  and  that  an  appeal  to  the  shippers 
themselves  is  the  quickest  refutation  of  it  5  and  as  the  Southern  Pacific 
has  not  been  at  any  time  without  competition  during  the  period  referred 
to,  both  by  sea  and  rail,  shippers  have  been  free  to  exercise  their  choice 
of  routes,  and  to  say  that  they  could  be  forced  over  any  special  route 
simply  shows  ignorance  of  the  subject  and  of  the  method  of  soliciting 
and  handling  traffic,  to  say  nothing  of  the  well-known  independence  of 
shippers  under  competitive  conditions.  The  Union  Pacific  has  been 
represented  in  California  by  as  large  a  staff  of  soliciting  agents  as  the 
Central  and  Southern  Pacific,  and  all  the  other  competing  companies 
have  also  been  represented. 

(4)  Mr.  Coombs  explains  the  Union  Pacific's  course  in  building  roads, 
or  entering  into  alliance  with  roads  already  built  to  the  north  and  south 
of  it,  which  should  act  as  feeders  to  the  main  line  east  of  Ogden,  as 
being  necessary  to  release  itself  from  the  clutches  of  its  competitor. 
This  simply  anticipates  a  charge  that  the  Union  Pacific  has  itself  been 
building  lines  to  divert  freight  from  the  Central  Pacific.  Now,  the 
facts  are  that  the  Utah  Northern  was  commenced  in  1872,  some  ten  or 
twelve  years  before  the  Southern  Pacific  was  built.  The  Oregon  Short 
Line  was  commenced  before  the  Southern  Pacific  was  completed;  when 
the  Central  was  then,  as  it  is  now,  being  conducted  upon  lines  of  great 
liberality,  while  our  eastern  neighbor,  the  Union  Pacific,  charged  over 
the  Utah  Northern  from  Ogden  to  Silver  Bow,  Mont.,  first-class,  $4.10; 
second,  $4;  third,  $3.75;  fourth,  $3.25,  per  hundred  pounds. 

When  through  rates  were  established  between  San.  Francisco  and 


92 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


Silver  Bow  the  proportions  received  by  the  two  companies  were  as 
follows : 


First 
class. 

Second 
class. 

Third 

class. 

Fourth 
class. 

Total  rate  per  100  pounds 

$5  05 

$4  55 

$4  05 

$3  50 

Utah  Northern  (Union  Pacific) 

4  25 

4  00 

3  75 

3  25 

Central  Pacific  

.80 

.55 

.30 

.25 

The  disproportionate  character  of  these  rates  will  be  better  realized 
when  it  is  noted  that  the  rates  received  by  the  Utah  Northern  were 
for  a  haul  of  390  miles,  while  those  received  by  the  Central  Pacific 
were  for  a  haul  of  883  miles  west  of  Ogden,  and  they  were  fixed  by  the 
Union  Pacific,  which  then  controlled  the  situation  with  respect  to  this 
through  business. 

The  Oregon  Short  Line  cut  off  from  the  Central  Pacific  all  participa- 
tion in  the  large  and  valuable  traffic  interchanged  by  Oregon  and 
Washington  with  the  Eastern  States  by  way  of  the  Union  and  Cen- 
tral, which,  before  this  diversion,  was  carried  via  Ogden  to  Roseville, 
through  to  Oregon  and  Washington.  When  the  Utah  and  Northern 
Railroad  was  completed  to  Butte,  Mont.,  it  passed  into  the  control 
of  the  Union  Pacific,  which  instantly  began  discriminating  against  the 
Central  Pacific  traffic  with  Montana,  which  was  considerable,  in  order 
to  force  the  business  over  the  Union  Pacific's  rails  and  extensions,  and 
to  divert  it  from  the  Central  Pacific  line  over  which  it  had  been  going; 
and  its  efforts  were  largely  successful. 

When  the  Central  Pacific  first  commenced  taking  coal  from  the 
Union  Pacific  in  1870  we  paid  that  company  for  coal  from  the  Almy 
mine  $4.15  per  ton  of  2,000  pounds  for  a  haul  of  75  miles  mostly  down 
grade  to  Ogden,  or  5£  cents  per  ton  per  mile,  while  coal  is  hauled  on 
some  of  the  roads  in  this  country  for  2J  mills  per  ton  per  mile.  In  fact, 
very  high  rates  prevailed  until  the  Denver  and  Rio  Grande  Western 
was  built  to  Ogden,  and  since  then  we  have  bought  coal  delivered  there 
for  about  half  of  what  we  paid  for  transporting  our  own  coal  75  miles, 
and  the  Rio  Grande  Western  hauls  it,  as  I  remember,  about  125  miles. 
I  do  not  believe  any  of  the  officers  of  the  Union  Pacific  Company  who 
were  familiar  with  their  business  have  ever  made  any  complaint  of  our 
handling  their  business  on  the  Central  Pacific  line;  and  since  such 
great  companies  as  the  Chicago,  Burlington  and  Quincy,  Rock  Island, 
Chicago  and  Alton,  and  others,  which  were  their  through  connections, 
reached  us  at  Ogden,  we  have  endeavored  to  treat  them  well;  and 
while  doing  some  things  for  the  Union  Pacific  that  we  did  not  do  for 
them,  we  could  not  afford,  because  we  did  not  think  it  was  right  for 
us  to  refuse  to  handle  the  business  they  brought  to  us  and  give  some- 
thing in  return  for  the  business  so  brought. 

Let  me  say  here  that,  as  a  rule,  the  Central  Pacific  has  stood  with 
the  Union  Pacific  against  other  lines  in  all  matters  relating  to  the 
through  traffic,  where  it  could  be  done  without  affecting  injuriously  the 
public  interest.  Previous  to  1887,  the  larger  part  of  the  time,  the  traffic 
between  all  the  lines  was  pooled,  and  the  share  of  the  Union  Pacific  was 
determined  either  by  its  own  officers  or  by  disinterested  parties.  If 
the  common  control  of  the  Central  and  Southern  restrained  the  Union 
Pacific  in  any  degree  in  its  independence  of  action,  that  restraint  was 
never  any  greater  than  it  was  upon  each  and  every  other  competitor ; 
and,  far  from  being  harmful  to  the  Union  Pacific,  it  was  of  incalculable 
benefit  in  preventing  unrestricted  and  unregulated  competition,  which, 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  93 

because  of  its  greater  volume  of  business,  would  have  been  more  hurt- 
ful to  the  Union  Pacific  than  to  any  other  company.  I  would  be  will- 
ing to  leave  it  to  any  court  of  practical  railway  managers  whether  the 
stability  in  rates  would  not  have  been  less  constant  and  effective  during 
the  whole  period  had  either  the  Union  or  Central  controlled  the  other, 
or  had  the  two  roads  been  operated  as  a  single  interest. 

Considerable  has  been  said  with  reference  to  a  plan  which  one  of  the 
Senators  has  prepared  for  the  settlement  of  the  debt;  and  I  may  be 
pardoned  for  saying  that,  in  my  opinion,  its  operation  would  result  not 
in  benefit  but  in  harm  to  any  interest  that  deserves  benefit,  as  it  would 
retard  commerce  and  trade,  and  render  the  stock  of  both  the  Union 
and  Central  Pacific  railroads  valueless  to  their  owners.  Looking  back 
upon  the  situation  at  the  time  the  acts  of  1862  and  1864  were  passed, 
and  at  the  temper  and  sentiment  of  Congress  at  that  time,  1  can  under- 
stand how  difficult  it  must  be  for  Members  of  Congress  whose  familiarity 
with  national  legislation  came  at  a  later  date  to  appreciate  just  what 
the  position  of  the  Government  was  toward  these  Pacific  railroad  enter- 
prises, and  I  unhesitatingly  say  that  it  was  never  contemplated  by  the 
statesmen  of  that  day  that  the  Union  and  Central  Pacific  railroads 
should  form  one  continuous  connected  line,  to  be  operated  without  being 
permitted  to  make  connections  or  arrangements  for  interchange  of  traffic 
with  any  other  company  or  companies  which  should  compete  for  a  com- 
mon traffic. 

The  claim  is  in  itself  preposterous,  as  I  think  I  can  show  you. 
Neither  of  these  acts  can  be  fairly  construed  into  such  a  strained 
signification,  and  if  they  had  the  meaning  imputed  to  them  by  Senator 
Thurstou,  why  does  the  interstate  commerce  act  provide,  as  in  section 
3,  that  u  it  shall  be  unlawful  for  any  common  carrier  to  make  or  give 
any  undue  or  unreasonable  preference  or  advantage  to  any  particular 
person,  company,  firm,  corporation,  or  locality,  or  any  particular  descrip- 
tion of  traffic,  in  any  respect  whatsoever,"  etc.,  and  that  "  every  com- 
mon carrier  subject  to  the  provisions  of  this  act  shall,  according  to 
their  respective  powers,  afford  all  reasonable,  proper,  and  equal  facilities 
for  the  interchange  of  traffic  between  their  respective  lines  and  for  the 
receiving,  forwarding,  and  delivering  of  passengers  and  property  to 
and  from  their  several  lines  and  those  connecting  therewith,  and  shall 
not  discriminate  in  their  rates  and  charges  between  such  connecting 
lines." 

Referring  again  to  the  map.  let  me  say  that  it  is  to  the  agency  of 
these  powerful  competing  railroads  and  their  contributions  to  the 
traffic  of  the  Central  Pacific  quite  as  much  as,  perhaps  more  than,  to 
the  Union  Pacific,  that  the  Central  Pacific  has  enjoyed  so  large  a  share 
of  the  traffic  to  and  from  California.  Once  close  the  Ogden  gateway, 
or  attempt  to  place  them  at  a  disadvantage  as  compared  with  the  Union 
Pacific,  and  does  any  member  of  this  committee  doubt  that  they  will 
find  some  other  outlet  or  connection,  and  when  that  is  done  the  value 
of  the  Central  and  Union  Pacific  as  earning  properties  will  at  once 
and  permanently  be  damaged. 

Senator  STEWART.  What  do  you  mean  by  that? 

Mr.  HUNTINGDON.  If  these  other  roads  were  shut  out  from  Ogden 
they  would  force  themselves  through  and  build  another  bridge  of  uOO 
miles  long  (as  it  were)  across  that  desert. 

The  CHAIRMAN.  They  would  only  do  that  if  they  considered  the 
California  business  sufficient? 

Senator  MORGAN.  That  would  not  hurt  the  country? 

Mr.  HUNTINGTON.  Nothing  could  hurt  that  country. 


94  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  It  would  do  it  good? 

Mr.  HUNTING  TON.  No,  sir. 

Senator  MORGAN.  Is  that  because  the  land  is  intrinsically  not  fertile 
or  because  of  want  of  water? 

Mr.  HUNTINGTON.  If  there  was  water  there  there  would  be  people 
there. 

Senator  MORGAN.  It  only  depends  upon  the  question  of  human  inge- 
nuity to  get  water  there? 

Mr.  HUNTINGTON.  But  there  is  no  wafer  in  sight.  They  bring  water 
there  by  gravity. 

Senator  MORGAN.  Snows  fall  in  that  country! 

Mr.  HUNTINGTON.  Not  much  snow.  Five  inches  of  all  kinds  of  water 
in  Nevada  in  the  year. 

Senator  MORGAN.  You  do  not  suppose  that  that  country  is  always 
to  be  a  desert  ? 

Mr.  HUNTINGTON.  I  believe  that  between  there  and  the  western 
passes  of  the  Wahsatch  Mountains,  if  we  were  to  move  our  railroad 
away,  there  would  not  be  in  two  years'  time  a  thousand  people  there 
within  5  miles  of  the  road. 

Senator  MORGAN.  But  if  you  built  two  lines  of  railroad  there,  there 
would  be  2,000  people. 

Mr.  HUNTINGTON.  No  ;  I  do  not  think  there  would  be  any  more  than 
there  are  now. 

The  CHAIRMAN.  The  capital  invested  must  necessarily  depend  upon 
the  termini  of  the  roads. 

Mr.  HUNTINGTON.  Yes;  that  road  might  as  well  be  a  thousand  miles 
in  the  air  so  far  as  any  local  business  is  concerned. 

Senator  MORGAN.  I  think  that  these  gentlemen  from  the  West  are 
anticipating  that  some  day  or  other  they  will  have  a  tine  country  there 
by  virtue  of  irrigation. 

Mr.  HUNTINGTON.  I  hope  they  are  right,  but  I  do  not  see  where  they 
are  likely  to  get  the  water. 

Senator  MORGAN.  Take  the  country  500  miles  to  the  north  of  the 
Central  Pacific  and  an  equal  area  of  country  500  miles  to  the  south  of 
it;  is  the  intrinsically  fertile  soil  as  good  in  the  southern  portion  as  it 
is  in  the  northern  portion1? 

Mr.  HUNTINGTON.  No;  I  should  think  it  was  better  in  the  north. 

Senator  MORGAN.  Is  it  very  much  better? 

Mr.  HUNTINGTON.  I  should  think  it  considerably  better.  When  you 
get  to  the  Snake  River  in  the  north,  in  here  [indicating  on  the  map],  I 
believe  the  country  is  very  good.  Here  to  the  south  of  it  | indicating] 
it  is  very  poor.  There  are  no  agricultural  lands  in  the  lower  part  of 
Nevada  or  in  the  southwestern  part  of  Utah.  I  had  a  corps  of  engi- 
neers in  Washington  County  looking  out  for  coal.  They  didn't  find 
any  coal  there,  and  they  said  there  "wasn't  any  coal  and  nothing  else 
there."  This  road  here  [indicating  on  the  map]  lies  on  the  high  plateau 
of  Albuquerque.  This  line  here  to  White  River  [indicating]  lies  low, 
not  more  than  GOO  or  700  feet  above  tide  water.  It  can  be  irrigated 
from  the  Colorado  River  or  from  the  Gila  or  from  the  Salt  River,  and 
these  rivers  can  bring  any  amount  of  water. 

Senator  MORGAN.  The  area  south  [indicating  on  the  map]  is  an  abso- 
lute desert  of  sage  brush  ? 

Mr.  HUNTINGTON.  Yes;  there  is  some  actual  timber. 

Senator  MORGAN.  It  is  fertile  land,  and  what  it  wants  is  water? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  These  lauds  are  as  good  as  the  lands  to  the  north? 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  95 

Mr.  HUNTINGTON.  I  should  think  so. 

Senator  MORGAN.  And  the  reason  why  the  lands  are  better  to  the 
north  is  that  there  are  better  opportunities  for  irrigation,  on  account  of 
the  mountains,  and  because  more  snow  falls  here  than  falls  below! 

Mr.  HUNTINGTON.  Yes;  there  is  much  more  snow  here  [indicating] 
than  there  is  in  Arizona. 

What,  then,  will  happen  to  the  Government's  lien?  Will  there  be 
any  recompense  to  the  Union  Pacific  division  of  the  "  connected  con- 
tinuous line,"  by  additions  to  its  traffic  and  revenues'?  Certainly  not, 
because  these  competitors  are  not  going  out  of  the  through  business, 
for  that  would  not  be  to  their  own  interest  or  to  that  of  the  Govern- 
ment or  the  public.  They  will  find  a  new  path,  and  the  Central  and 
Union  Pacific  will  not  only  lose  business,  but  suffer  material  loss  in  the 
average  rate  obtainable  for  what  is  left.  These  are  facts  which  it  will 
be  well  for  you,  gentlemen  of  the  committee,  as  men  of  intelligence 
and  business  experience,  to  carefully  consider. 

It  is  well  to  note  that  the  Rock  Island  and  the  Burlington  could  as 
well  have  connected  with  the  Union  Pacific  at  Denver  as  with  the  Rio 
Grande  and  Colorado  Midland  roads,  but  the  Union  Pacific  closed  its 
line  and  forced  them  to  an  adverse  connection.  What  has  been  the 
result?  Instead  of  these  two  powerful  systems  being  feeders  to  the 
Union  Pacific  line  for  about  one-half  of  its  length  they  have  become 
gigantic  competitors,  and  this  competition  has  been  the  most  powerful 
factor  in  the  diversion  of  traffic  from  the  Union  Pacific  line,  while  at  the 
same  time  they  have  been  equally  potent  in  collecting  and  bringing  to 
the  Central  Pacific  traffic  which,  without  their  aid,  would  have  gone  by 
the  Southern  gateways  and  been  lost,  not  only  to  the  Union  but  to  the 
Central  Pacific  also. 

Again,  the  Union  Pacific,  owning  and  operating  the  Utah  and  North 
ern,  running  from  Ogdeu  to  Butte  and  Helena,  and  connecting  with  the 
Oregon  Short  Line  at  Pocatello  for  Portland  and  Puget  Sound,  also  shut 
out  the  Rio  Grande  Western  and  all  its  connections  from  any  participa- 
tion in  that  business  upon  fair  or  living  terms ;  so  that  it  may  be  assumed 
that  the  policy  of  the  Union  Pacific  has  been  to  cut  off  all  connection 
and  interchange  of  traffic  with  roads  physically  connected  with  it  but 
which  were  not  under  its  control.  I  have  already  given  you  an  example 
of  this.  You  must  remember  that  the  Chicago,  Burlington  and  Quincy, 
the  Rock  Island,  etc.,  could  all  make  connection  at  Denver  with  the 
Santa  Fe  system  and  could  divert  their  traffic  and  send  it  into  California 
via  Mojave  without  much  sacrifice  of  their  revenue.  To  the  Rock  Island 
it  would  be  a  matter  of  indifference  whether  it  carried  the  traffic  to  Fort 
Worth  and  gave  it  to  the  Texas  and  Pacific,  or  to  Denver  and  delivered 
it  to  its  connections  for  the  Ogden  route.  The  Chicago,  Burlington  and 
Quincy  and  the  Missouri  Pacific  could  in  like  manner  connect  with  the 
Santa  Fe,  which  would  no  doubt  be  very  glad  to  open  its  line  to  such 
powerful  feeders.  In  fact,  I  see  no  possible  advantage  which  could  accrue 
to  the  Union  Pacific  by  any  such  arrangement  as  is  proposed  by  Senator 
Thurston,  but  I  do  see  the  great  harm  and  detriment  that  would  result 
to  both  of  these  bond-aided  roads,  and  one  thing  I  believe  to  be  certain — 
that  it  would  permanently  decrease  the  value  of  the  Government  lien. 

It  does  seem  to  me  that  it  would  be  better  for  all  interests — of  course, 
including  the  greater  interest  of  the  Government — that  the  Central 
Pacific  remain,  as  it  were,  an  open  highway  to  treat  all  who  meet  it  at 
Ogden  fairly  and  alike,  as  it  has  the  physical  and  financial  ability  to  do — 
if  the  Government  will  make  a  fair  settlement,  as  1  liavo  said— many 
times  the  business  that  would  reach  it  there.  The  Central  Pacific  will 


96  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

continue  to  do  as  it  lias  done — pay  all  its  debts  and  endeavor  to  create 
harmony  among  the  lines  reaching  it  at  Ogden,  so  as  to  make  not  only 
all  the  companies,  but  the  patrons  of  each  and  every  company,  satisfied. 
If  there  should  be  one  continued  line  from  Chicago  to  San  Francisco,  as 
it  is  now  from  Chicago  over  the  Northwestern  Kailroad  to  Ogden,  these 
other  great  companies  could  hardly  expect  fair  usage  from  such  a  line, 
reaching,  as  it  would,  something  more  than  halfway  out,  when  they  were 
refused  anything  like  equal  mileage  rates  from,  say,  Cheyenne  to  Ogden, 
or  other  points  east  of  the  Rockies,  for  they  are  strong  and  important 
companies,  and  would  be  bound  to  build  through  from  Ogden  to  the 
Pacific  Coast  over  a  barren  country  that  needs  no  railroad. 

The  country  between  theWahsatchand  the  Sierra  Nevada  mountains 
is  like  a  bridge,  high  in  the  air,  so  far  as  business  is  concerned,  and 
after  a  new  road  was  completed  the  competition  brought  about  under 
such  circumstances  would  probably  make  it  impossible  for  either  road 
to  earn  sufficient  to  pay  anything  to  the  Government,  and  perhaps  not 
even  to  be  able  to  meet  its  current  and  fixed  charges  outside  of  the 
Government  claim.  So  it  would  be  an  injury  not  only  to  this  great 
Central  interest,  but  to  the  Northern  Pacific,  the  Great  Northern,  the 
Atcliisou,  Topeka  and  Santa  Fe,  the  Southern  Pacific,  and  the  Texas 
Pacific,  and  many  other  roads  participating  with  them  in  this  trans- 
continental business.  In  short,  the  question  before  you,  gentlemen,  is 
whether  this  road  over  the  desert  between  the  eastern  base  of  the 
Sierra  Nevadas  and  the  western  base  of  the  Wahsatch  shall  be  used  as 
a  bridge  for  all  the  roads  reaching  Ogden  from  the  East,  or  used  for 
only  one. 

As  for  the  rates  of  fares  and  freights  on  the  Central  Pacific,  I  am 
quite  sure  they  are  lower  than  those  of  any  other  road  in  the  world 
operated  under  the  same  circumstances.  The  Central  and  Southern 
Pacific  west  of  Ogden  have  no  great  tonnage.  While  the  fruit  products 
are  fairly  large,  the  miscellaneous  freight  is  not  large,  as,  say,  west  of 
the  one  hundredth  meridian  lies  more  than  one-half  of  the  acreage  of 
the  United  States,  with  not  over  4,000,000  of  people,  while  east  of  that 
line,  on  the  same  or  less  acreage,  there  are  probably  65,000,000  of  people 
to-day.  The  Chesapeake  and  Ohio  Railroad,  some  few  years  ago, 
transported,  in  twelve  months,  29,000,000  pounds  of  freight  more  than 
was  handled  over  the,  say,  8,000  miles  of  the  Central  and  Southern 
Pacific  west  of  Ogden  and  New  Orleans.  Notwithstanding  this  light 
tonnage,  the  average  rates  per  passenger  per  mile  for  1894  were  1.946 
cents,  or  less  than  2  cents.  The  average  rates  per  ton  per  mile  for  1894 
were  1.171  cents,  or  less  than  12  mills. 

For  the  ten  months  ended  October  31,  1895  (the  latest  date  to  which 
we  have  this  information),  the  average  rates  were  1.054  cents,  or  10 £ 
mills;  Avhich,  considering  the  vast  mileage  and  the  high  cost  of  fuel 
and  labor — in  fact,  almost  everything  that  enters  into  the  operation  of 
these  roads  is  much  higher  than  in  any  other  part  of  the  United  States — 
is  phenomenally  low,  and  the  roads  could  not  live  unless  those  control- 
ling them  were  exceedingly  watchful  and  practiced  a  rigid  and  intelli- 
gent economy,  keeping  their  rolling  stock  and  permanent  way  in  the 
very  best  condition,  for  these  are  the  tools  by  which  the  railroad  makes 
its  money. 

But  I  have  detained  the  committee  too  long,  and  will  hurry  my 
remarks  to  a  close.  These  debts  are  soon  coming  due,  and  I  hope  you 
will  offer  us  something,  the  requirements  of  which  the  company  can 
meet.  I  have  been  in  business  for  myself  sixty  years,  lacking  only  a 
few  months,  and  I  have  always  paid  100  cents  on  the  dollar,  While 


GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS.  97 

this  is  not  a  personal  debt  of  mine,  yet  I  take  as  much  interest  in  the 
matter  as  I  would  if  I  were  the  sole  owner  and  responsible  for  the  Gov- 
ernment claim,  for  the  Central  Pacific  is  the  first  railroad  that  I  ever 
built,  and  no  fairer  or  honester  work  has  ever  been  done.  I  have  noth- 
ing- to  take  back  and  nothing  to  apologize  for  in  that  undertaking,  and 
I  do  not  come  here  asking  equities  or  eulogies.  I  only  ask  on  behalf 
of  the  Central  Pacific  Eailroad  Company  that  you  treat  the  question  of 
a  settlement  with  the  Government  on  business  principles.  If  these  are 
observed  I  have  no  fear  of  the  result. 

I  would  recommend  the  company  to  pay  as  much  interest  currently 
as  the  road  could  earn  over  its  fixed  and  operating  expenses  (other 
than  the  Government  claim,  as  all  other  than  the  Government  claim  is 
perfectly  good,  there  being  little  or  no  floating  debt),  and  pay  into  the 
Treasury  of  the  United  States  every  six  months  a  fixed  sum,  until  the 
whole  indebtedness,  both  principal  and  the  interest  that  has  accrued 
in  the  past,  is  paid.  As  these  payments  are  made,  the  principal  amount 
due  the  Government  will  be  steadily  diminished,  while  the  property 
will  continue  naturally  to  increase  in  value,  for  every  house  that  is 
built  upon  or  near  the  line  will  bring  a  new  patron,  and  every  acre 
plowed  will  bring  additional  tonnage,  so  that  the  security  will  be 
unquestionably  good. 

We  had  hoped  that  the  Government  would  take  1£  per  cent  interest 
on  the  great  debt  owing  to  it  by  the  Central  Pacific  and  require  a 
certain  fixed  sum  paid  011  the  1st  day  of  January  and  the  1st  day  of 
July  of  each  year  until  the  whole  amount,  comprising  the  original  prin- 
cipal of  the  debt  and  all  the  back  interest,  had  been  finally  and  fully 
liquidated.  In  doing  this,  I  should  be  satisfied  that  we  had  done  well 
by  the  Government,  considering  the  fact  that  the  road  had  received  so 
little  from  the  Government  business  sent  over  it  compared  with  what 
it  was  expected,  when  the  acts  of  1862  and  1864  were  passed,  that  the 
company  would  get.  Up  to  the  time  of  the  passage  of  those  acts,  the 
Government  had  been  paying  vast  sums  for  policing  the  immense  area 
of  country  between  the  Missouri  and  Sacramento  rivers. 

When  the  Pacific  railroads  were  completed  and  in  operation,  the  Gov- 
ernment might  well  say,  "  We  have  builded  better  than  we  knew,  even 
if  we  get  no  interest  upon  the  money  loaned  toward  the  construction  of 
this  great  work,  for  it  was  done  seven  years  before  the  time  allowed  to 
the  companies  for  the  completion  of  the  undertaking,  and  in  those  seven 
years  the  Government  saved  more  than  all  the  money  loaned  to  these 
organizations.77  So  well  was  it  for  the  Government  that  it  gave  freely 
to  the  Northern  Pacific  and  to  the  Atlantic  and  Pacific  land  which  was 
of  greater  value  than  the  bonds  and  lands  granted  to  the  pioneer  roads. 
The  Government  must  have  realized  that  in  doing  this  it  was  deliber- 
ately destroying,  or  greatly  weakening,  the  security  it  had  on  the  Cen- 
tral line,  because  it  was  taking  away  from  it  much  of  its  earning  power, 
from  which  alone  the  Government  could  expect  a  return  of  the  money 
loaned,  and  such  was,  in  fact,  the  logical  result.  Yet,  who  doubts  to-day 
that  the  wisdom  of  the  statesmen  of  that  time  was  amply  justified  when 
the  magnificent  development  of  the  great  West,  due  to  the  onward 
march  of  the  world's  greatest  civilizer — the  railroad — is  considered? 
For,  from  the  moment  of  their  completion,  these  roads,  like  the  Central 
and  the  Union  Pacific,  have  thoroughly  policed  the  wide  expanse  of  ter- 
ritory which  they  traverse,  without  .cost  to  the  Government,  and  have 
made  it  possible  to  settle  up  the  arable  lands  along  their  lines. 

But  we  shall  have  to  leave  to  you,  gentlemen  of  the  committee,  the 
method  of  this  proposed  settlement,  and  I  have  faith  to  believe  that  in 
p  R 7 


98  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

the  proposition  you  lay  before  Congress  you  will  not  put  upon  the 
Central  Pacific  a  burden  greater  than  it  can  bear.  Speaking  on  behalf 
of  that  road,  I  assure  you  that  we  will  do  all  we  can,  and  no  corporation 
or  individual  can  do  more  than  that.  Further  than  that,  it  is  my  belief 
that  no  other  men,  or  set  of  men,  can  do  as  much  for  the  Central  Pacific 
in  clearing  off  this  obligation  as  its  builders  can.  The  record  of  the 
road  is  clean  and  clear,  despite  the  cries  of  the  noisy  few,  who,  like 
jackals,  howl  along  its  track,  and  the  great  mass  of  the  people  of  Cali- 
fornia know  and  appreciate  the  greatness  and  the  value  of  the  work 
that  we  have  done.  I  personally  am  proud  of  the  record  we  have  made, 
for  we  have  never  failed  to  fulfill  all  our  contracts  with  the  Government, 
with  States,  and  with  individuals. 

Senator  MORGAN.  You  mentioned  that  under  certain  conditions  or 
certain  methods  of  dealing  with  the  Central  Pacific  the  other  compet- 
ing lines  south  of  it  will  be  compelled  to  make  their  way  across  this 
desert  country  to  the  Pacific  Ocean — to  bridge  the  desert.  What 
motive  would  they  have  for  getting  to  that  country  except  for  the  traffic? 

Mr.  HUNTINGTON.  They  would  go  for  the  traffic  beyond  the  desert. 

Senator  MORGAN.  Is  there  enough  to  justify  their  building  the  road 
through  f 

Mr.  HUNTINGTON.  I  hardly  think  there  is,  but  these  things  are  being 
done  continually.  They  would  divide  the  cost,  and  when  they  get  to 
this  point  [indicating  on  the  map]  they  would  have  a  thousand  miles  of 
haul,  which  might  make  up  for  the  haul  across  the  desert. 

Senator  MORGAN.  And  each  of  those  roads  that  would  tap  the  Pacific 
Coast  on  the  Southern  Pacific  would  perhaps  draw  a  considerable  por- 
tion of  traffic  from  the  Southern  Pacific ? 

Mr.  HUNTINGTON.  The  roads  would  probably  get  their  proportion  of 
our  tonnage,  and  we  would  try  to  return  tonnage  to  them. 

Senator  MORGAN.  Would  not  that  be  one  of  the  inducements  for  the 
building  of  this  bridge,  as  you  call  it,  across  the  desert? 

Mr.  HUNTINGTON.  They  would  get  tonnage. 

Senator  MORGAN.  If  tonnage  is  not  there  they  could  not  get  it? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Do  you  think  that  the  prospective  growth  of  the 
Pacific  Coast  south  of  San  Francisco  would  be  sufficient  to  justify  these 
roads  in  building  this  bridge  across  the  desert  f 

Mr.  HUNTINGTON.  That  is  a  question.  But  I  think  that  three  or 
four  of  these  great  roads  would  join  together  and  build  a  road  and  have 
a  joint  ownership  of  it. 

Senator  MORGAN.  I  notice  that  there  are  seven  great  railroads  which 
connect  the  Pacific  Coast  with  the  country  to  the  east  of  the  Eocky 
Mountain  range — the  Northern  Pacific,  the  Great  Northern,  the  Central 
Pacific,  the  Oregon  Short  Line,  the  Union  Pacific,  the  Southern  Pacific, 
the  Canadian  Pacific,  and  the  Atchisou  and  Topeka.  Each  of  these 
roads  is  making  a  living? 

Mr.  HUNTINGTON.  The  Atchison  has  been  in  the  courts  twice.  The 
last  time  it  showed  pretty  bad,  and  the  first  time  not  much  better. 

Senator  MORGAN.  Their  being  in  court  does  not  prove  that  they  are 
not  making  a  living,  does  it? 

Mr.  HUNTINGTON.  I  had  supposed  so. 

Senator  MORGAN.  The  Union  Pacific  appears  to  be  making  a  better 
living  since  it  has  been  in  court  than  it  was  out  of  the  court. 

Mr.  HUNTINGTON.  The  Union  Pacific  has  not  made  the  interest  on 
its  first-mortgage  bonds,  I  believe,  which  is  the  best  evidence  that  it  is 
not  doing  well. 


GOVERNMENT    DEBT   OF    THE    PACIFIC    RAILROADS.  99 

Senator  MORGAN.  Still  its  income  is  increasing? 

Mr.  HUNTINGTON.  I  should  hope  so,  and  I  believe  it  is. 

Senator  MORGAN.  Do  you  think  that  the  competition  between  these 
roads  is  going  to  result  in  the  bankruptcy  of  all  of  them  because  there 
is  not  enough  traffic  with  the  Pacific  Coast  to  supply  them  with 
business  ? 

Mr.  HUNTINGTON.  I  think  perhaps  they  will  have  to  run  very  close 
in  order  to  get  past  the  headlands. 

Senator  MORGAN.  Still  they  will  all  survive? 

Mr.  HUNTINGTON.  I  really  do  not  know,  but  I  should  think  they 
would  have  pretty  hard  times.  However,  not  being  a  prophet  or  the  son 
of  a  prophet,  I  would  not  like  to  venture  a  prediction. 

Senator  MORGAN.  Do  you  think  that  the  stockholders  had  better  go 
into  bankruptcy  than  continue  to  run  those  roads? 

Mr.  HUNTINGTON.  I  have  been  in  mercantile  business  for  fifty-seven 
years  and  have  been  through  all  the  panics.  I  commenced  in  a  very 
small  way  and  have  seen  hard  times,  but  I  have  never  had  a  piece  of 
my  paper  go  to  protest  in  all  that  time. 

Senator  MORGAN.  You  mean  that  your  genius  can  survive  calamities 
which  others  would  not  survive? 

Mr.  HUNTINGTON.  I  would  not  call  it  by  that  name;  I  would  call  it 
untiring  perseverance,  that  Avorks  twenty -four  hours  a  day,  if  necessary. 
I  believe  that  I  have  done  better  than  anybody  else  could  for  the  Cen- 
tral Pacific. 

Senator  MORGAN.  Do  you  really  believe  that  there  is  enough  of 
income  for  these  seven  railroad  lines  to  sustain  prices? 

Mr.  HUNTINGTON.  I  believe  that  they  should  be  paid  fair  prices. 
There  have  been  a  great  many  uncomfortable  things  said  by  the  people 
of  San  Francisco.  For  particular  reasons  they  went  and  started  a  line 
of  steamers  from  San  Francisco  to  Panama.  They  ran  it  at  great  cost. 
As  they  say  themselves,  they  made  $19,000,000  at  a  cost  of  $400,000, 
and  they  would  have  continued  if  they  could  have  raised  the  money  to 
carry  it  on. 

Senator  MORGAN.  Why  did  they  stop! 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  But  during  that  time  they  had  pretty  severe  com- 
petition ? 

Mr.  HUNTINGTON.  They  made  their  own  rates. 

Senator  MORGAN.  They  had  competition,  however? 

Mr.  HUNTINGTON.  They  may  have  had  competition. 

Senator  MORGAN.  What  was  it? 

Mr.  HUNTINGTON.  They  had  the  Pacific  Mail  and  the  overland 
railroads. 

Senator  MORGAN.  In  combination? 

Mr.  HUNTINGTON.  I  do  not  know  whether  there  was  a  combination. 
They  had  to  go  down  on  their  prices. 

Senator  MORGAN.  I  understand  that  you  had  a  contract  with  the 
Pacific  Mail. 

Mr.  HUNTINGTON.  The  contract  with  the  Pacific  Mail  was  six  or 
seven  years  ago.  We  had  no  contract  then. 

Senator  MORGAN.  You  do  not  consider  it  necessary  that  the  Congress 
of  the  United  States  should  wreck  the  Central  Pacific? 

Mr.  HUNTINGTON.  I  believe  it  will  be  the  worst  thing  that  the 
Government  could  possibly  do,  and  I  would  awfully  hate  to  have  the 
Government  do  it.  I  would  rather  work  twenty  years  without  a  dollar 
than  to  have  the  Central  Pacific  fail  in  any  one  thing.  The  Central 


100  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Pacific  will  pay  a  fixed  sum,  aud  at  any  time  that  it  fails  for  six  months 
to  do  that  the  Government  can  go  right  in  and  take  possession  of  the 
property  without  going  to  a  court  or  to  Congress. 

Senator  MORGAN.  Ought  there  not  be  an  intimate  natural  business 
connection  under  one  management  between  the  Union  Pacific  and  the 
Central  Pacific? 

Mr.  HUNTINGTON.  I  believe  that  that  would  be  the  worst  thing  that 
could  happen.  I  believe  that  we  can  accommodate  all  other  roads 
better  without  any  such  business  connection. 

Senator  MORGAN.  Is  there  any  reason  against  it? 

Mr.  HUNTINGTON.  I  think  there  is. 

Senator  MORGAN.  What  is  it? 

Mr.  HUNTINGTON.  The  Central  Pacific  has  been  run  better  than  any 
of  the  other  Pacific  roads. 

Senator  MORGAN.  I  am  speaking  of  the  future. 

Mr.  HUNTINGTON.  I  do  not  know  how  to  judge  of  the  future  except 
by  the  past.  The  competition  is  certainly  sharp  enough.  It  has  nearly 
bankrupted  all  the  roads. 

Senator  MORGAN.  Would  it  increase  the  competition  to  have  those 
two  companies  under  one  management1? 

Mr.  HUNTINGTON.  Probably  not. 

Senator  MORGAN.  Would  it  increase  or  lessen  the  expenses? 

Mr.  HUNTINGTON.  I  think  it  would  increase  the  expenses.  I  do  not 
think  that  anybody  can  run  the  Central  Pacific  as  well  as  I  can,  and 
keep  it  in  such  good  condition. 

Senator  MORGAN.  But  after  you  pass  away  posterity  will  have  to 
take  charge  of  it. 

Mr.  HUNTINGTON.  You  and  I  will  hold  on  a  good  while  yet. 

Senator  MORGAN.  I  hope  so;  but  what  I  want  to  know  is  whether  it 
is  not  better  and  cheaper  to  have  a  long  line  of  road  under  one  man- 
agement than  to  have  shorter  lines  under  two  managements? 

Mr.  HUNTINGTON.  We  have  virtually  under  one  management  9,000 
miles  of  road.  What  broke  the  Atchison  people  the  first  time  was  the 
building  of  a  line  from  Kansas  City  into  Chicago.  Before  that  they 
gathered  freights  at  three  or  four  different  places. 

Senator  MORGAN.  Your  answer  is  instructive  but  it  is  not  responsive. 
1  would  like  to  know  whether  you  do  not  think  that  a  line  from  Omaha 
to  San  Francisco  under  one  management  can  be  managed  more  cheaply 
and  with  larger  economies  than  two  lines  under  separate  management? 

Mr.  HUNTINGTON.  I  do  not  believe  so,  because  there  is  a  limit  to  the 
capacity  of  one  set  of  people. 

Senator  MORGAN.  You  have  incorporated  a  great  sweep  of  organiza- 
tion under  your  Kentucky  charter. 

Mr.  HUNTINGTON.  I  say  there  is  a  limit. 

Senator  MORGAN.  What  is  the  limit? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  How  many  miles  have  you  in  operation  on  the 
Southern  Pacific  under  your  Kentucky  charter? 

Mr.  HUNTINGTON.  Say  about  7,000  miles. 

Senator  MORGAN.  Then  that  is  not  the  limit. 

Mr.  HUNTINGTON.  I  do  not  think  that  anybody  will  work  as  I  do. 

Senator  MORGAN.  It  is  not  7,000  miles  between  Ogden  and  San  Fran- 
cisco; so  that  that  line  of  railroad  is  within  your  limit? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Then  your  argument  does  not  seem  to  hold  good. 

Mr.  HUNTINGTON.  I  hold  that  we  can  do  that  business  and  manage 


GOVEENMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  101 

that  road  more  economically  than  any  other  road  I  know  of  west  of  the 
Missouri  River.  A  gentleman  in  the  other  end  of  the  Capitol  said  that 
the  Central  Pacific  branches  were  not  worth  what  they  cost.  I  wish  to 
say  that  the  Central  Pacific  is  altogether  a  different  road  from  what  it 
was  when  it  was  built.  We  have  not  a  single  timber  structure,  not 
one.  When  we  built  the  road  we  had  very  large  trestles  over  moun- 
tains, and  wooden  bridges.  They  are  all  now  iron  or  steel  bridges  and 
the  canyons  are  all  filled  up  where  there  was  not  water  to  prevent  their 
being  filled  up.  We  filled  them  all  up  so  that  now  the  road  is  running 
on  solid  banks  over  those  mountains.  I  do  not  think  there  is  an  iron 
rail  in  the  main  track.  The  rails  are  all  steel.  The  road  is  pretty  thor- 
oughly ballasted.  We  had  on  that  road  when  we  started  $1,500,000  of 
convertible  bonds.  They  became  due  and  we  paid  them  off.  We  had 
$1,500,000  in  State-aid  bonds  and  we  paid  them  off"  when  they  became 
due.  We  renewed  the  debt  on  the  California  and  Oregon  division  for 
$1,500,000  less  than  the  old  mortgage.  In  short,  we  have  paid  oft 
$20,892,000,  and  our  rates  have  certainly  been  low.  There  is  no  better 
test  of  that  than  the  fact  that  the  price  of  laud  is  more  than  ten  times 
as  much  in  California  as  when  we  built  our  road. 

Senator  MORGAN.  Have  your  local  earnings  been  increasing  on  the 
Southern  Pacific  in  Arizona? 

Mr.  HUNTINGDON.  Yes.  They  are  irrigating  the  country  south  of  the 
Gila  River  between  Seneca  Canyon,  east  of  Tucson,  to  the  river — 300 
miles.  They  are  irrigating  all  that  country,  and  they  are  beginning  to 
produce  crops  at  Phoenix. 

Senator  MORGAN.  There  is  quite  a  large  population  pouring  in  there, 
is  there  not? 

Mr.  HUNTINGTON.  Yes;  at  Phoenix. 

Senator  MORGAN.  When  you  were  building  the  Southern  Pacific 
were  there  any  white  people  living  there? 

Mr.  HUNTINGTON.  Very  few. 

Senator  MORGAN.  So  that  that  country  is  prospering? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  the  railroad  is  largely  contributory  to  its 
prosperity  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  irrigation  is  a  big  thing  for  it? 

Mr.  HUNTINGTON.  Yes.  They  can  get  water  there  by  gravity,  but 
there  is  a  great  deal  of  that  country  where  there  is  no  water  to  be  had. 

Senator  MORGAN.  If  we  got  the  water  in  there  it  would  be  a  rich 
country  ? 

Mr.  HUNTINGTON.  I  do  not  know  how  rich  it  would  be.  That  would 
depend  upon  the  people  who. occupied  it. 

The  CHAIRMAN.  Your  people  built  what  is  called  the  Western  Pacific, 
commencing  at  Sacramento  and  ending  at  San  Jose? 

Mr.  HUNTINGTON.  We  completed  it;  we  did  not  commence  it. 

The  CHAIRMAN.  Why  was  that  road  built  to  San  Jose  instead  of  to 
Sacramento,  the  great  emporium  ? 

Mr.  HUNTINGTON.  That  is  a  little  unwritten  history.  1  was  here  in 
1862  when  the  railroad  bill  passed.  Some  of  our  enterprising  men  from 
San  Francisco  came  here  and  said  that  the  bill  would  not  be  passed 
unless  I  assured  them  of  the  building  of  the  road  between  San  Jose  and 
San  Francisco,  and  I  did  so.  For  some  reason  they  were  interested  in 
the  road  from  San  Jose  to  San  Francisco,  50  miles,  and  so  they  fixed  a 
road  something  like  that  at  Sioux  City.  They  located  it  from  San  Jose 
to  Sacramento,  which  is  173  miles,  over  Mount  Diablo,  while  there  was 


102  GOVERNMENT    DEBT    OF    THE   PACIFIC    RAILROADS. 

a  line  of  92  miles — the  tide  line.  They  had  got  23  miles  of  railroad 
above  Niles,  and  they  came  to  me  and  said  that  if  I  would  take  the  road 
and  finish  it  I  might  have  it,  and  I  did  so,  but  I  never  should  have  laid 
out  a  road  there ;  it  was  a  great  mistake. 

The  CHAIRMAN.  It  was  done  by  other  parties  ? 

Mr.  HUNTINGDON.  It  was  done  by  other  parties.  I  do  not  know  what 
interests  they  had. 

The  CHAIRMAN.  I  see  that  you  operate  5  miles  of  the  road  west  of 
Ogden.  Why  did  you  not  build  those  5  miles? 

Mr.  HUNTINGTON.  The  Union  Pacific  distributed  our  line.  We 
graded  down  to  Ogden  and  the  Union  Pacific  graded  up  to  Promontory 
Mountain,  54  miles  west  of  Ogden.  They  got  their  track  laid,  and  I 
told  them  I  would  like  to  have  that  road  from  Promontory  road  down 
to  Ogden,  which  was  not  much  of  a  town  then.  They  said  they  would 
let  me  have  it  down  to  this  place  5  miles  west  of  Ogden.  That  is  as 
far  as  we  could  get;  so  that  we  stop  there,  which  was  a  good  deal 
better  for  us  than  to  stop  on  the  top  of  the  mountain. 

The  CHAIRMAN.  It  is  said  that  the  Southern  Pacific  was  built  largely, 
if  not  entirely,  out  of  the  profits  of  the  Central  Pacific  syndicate.  How 
about  that?  Was  that  so  or  not? 

Mr.  HUNTINGTON.  Not  much  so.  I  had  been  doing  business  a  good 
deal.  I  had  a  good  deal  of  paper  out  in  New  York  in  the  panic  of 
1837,  and  I  took  care  of  it,  although  I  knew  a  great  many  rich  men  in 
New  England  and  New  York  who  were  bitten.  That  road  from  San 
Francisco  to  Gilroy,  80  miles,  the  Southern  Pacific  built  mostly  on 
time.  Then  we  built  the  Southern  Pacific  on  long  credit,  using  bonds 
as  collateral.  It  issued  thirty-eight  millions  of  bonds  on  1,000  miles 
of  road.  It  was  a  very  expensive  road.  The  tunneling  through  the 
Sierra  Madre  cost  us  about  $1,600,000.  There  are  17  tunnels,  and  it  was 
a  very  expensive  road  to  build.  We  issued  bonds  to  the  amount  of 
thirty-eight  millions.  Our  people  wanted  to  have  us  sell  the  bonds  even 
as  low  as  60  per  cent  in  order  to  pay  off  the  floating  debt,  and  I  said : 
"Never  mind  the  floating  debt;  I  will  take  care  of  it;  that  is  my  part 
of  the  business.'7  A  man  of  the  name  of  Michael  Reese,  of  San  Fran- 
cisco, came  to  me  in  New  York  and  laid  a  contract  on  my  table  where 
he  had  bought  ten  millions  of  these  bonds — three  millions  firm,  and  the 
rest  at  70,  72£,  and  75  per  cent.  I  knew  that  he  was  a  rich  man,  a  Jew. 
He  wanted  to  know  if  he  could  have  the  bonds.  I  said,  u  I  guess  so, 
but  not  now."  He  said  that  he  was  going  to  Europe  to-morrow,  and  I 
said,  "  All  right."  "  But,"  said  he,  u  can  I  have  them  ?"  I  said,  "  You 
can  have  them  the  day  after  the  court  of  last  resort  says  they  are  yours." 
He  said,  u  Do  you  not  think  it  is  a  good  contract?  "  and  I  said,  "  Yes; 
but  you  had  better  let  it  go." 

The  CHAIRMAN.  Had  he  these  bonds  hypothecated  ? 

Mr.  HUNTINGTON.  No;  he  had  a  contract  made  in  San  Francisco  and 
I  was  to  deliver  them  to  him  in  New  York;  in  short,  he  gave  it  up 
and  told  me  that  I  could  keep  the  contract.  He  did  not  get  the  bonds 
and  he  went  away,  and  I  kept  those  bonds  until  we  showed  that  the 
road  was  earning  an  income  on  its  bonds  and  something  more.  Then  I 
sold  two  millions  of  them  for  90,  and  so  on,  until  seven  or  eight  millions 
of  them  were  sold  as  high  as  116.  If  I  had  sold  the  bonds  at  60  it 
would  have  made  a  difference  of  between  $12,000,000  and  $14,000,000 
against  the  company. 

The  CHAIRMAN.  You  operate  some  nonaided  lines? 

Mr.  HUNTINGTON.  Yes. 

The  CHAIRMAN.  Tell  the  committee  the  importance  of  those  nonaided 
lines  to  the  main  line  of  the  Central  Pacific. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  103 

Mr.  HUNTINGTON.  These  nonaided  lines  are  through  what  may  be 
called  the  fat  parts  of  California.  There  is  one  up  the  coast  and  one 
down  the  coast.  One  runs  up  the  San  Joaquin  Valley  and  gathers  a 
large  tonnage  for  the  main  line.  There  are  three  branches,  and  almost 
every  mile  of  them  is  through  a  fat  country.  The  California  and  Oregon 
runs  by  mountains,  but  there  is  an  immense  tonnage  of  timber  there,  so 
that  every  mile  is  very  valuable  for  the  tonnage  which  the  road  covers 
and  takes  to  the  main  line.  We  have  a  number  of  feeders  in  California 
that  do  not  pay  the  cost  of  operation,  but  that  bring  a  large  tonnage  to 
the  main  line.  These  feeders  are  very  valuable  to  the  main  line  even 
though  they  do  not  show  much  earnings  of  themselves.  In  fact,  we 
have  about  some  fifteen  little  roads  in  California  that  were  each  of 
them  running  at  a  loss,  but  that  are  profitable  to  the  main  line. 

The  CHAIRMAN.  Do  you  give  these  nonaided  lines  a  larger  percentage 
of  earnings  than  you  give  the  Central  Pacific? 

Mr.  HUNTINGTON.  No  ;  I  think  not. 

Senator  STEWART.  The  terminal  facilities  that  you  have  are  operated 
in  connection  with  the  Central  Pacific? 

Mr.  HUNTINGTON.  Yes. 

The  CHAIRMAN.  The  terminals  do  not  belong  to  the  Central  Pacific? 

Mr.  HUNTINGTON.  Oh,  yes;  but  they  are  mortgaged  separately. 

Senator  BRICE.  Do  you  charge  an  arbitrary  rate  for  the  terminals? 

Mr.  HUNTINGTON.  We  charge  at  San  Francisco  5  cents  a  hundred 
pounds,  but  that  includes  the  steamboat  line. 

Senator  BRICE.  That  goes  into  the  treasury  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  Yes. 

Senator  BRICE.  There  are  no  separate  mortgages  by  any  of  the  other 
companies? 

Mr.  HUNTINGTON.  Oh,  no. 

Senator  BRICE.  There  is  no  separate  charge  made  for  the  terminals 
in  San  Francisco  as  against  the  Central  Pacific  I 

Mr.  HUNTINGTON.  No. 

Senator  BRICE.  When  it  comes  to  the  Central  Pacific  all  the  earnings 
go  into  its  treasury  ? 

Mr.  HUNTINGTON.  Yes;  there  is  nothing  that  goes  out  from  the  Cen- 
tral Pacific. 

Senator  BRICE.  If  the  Central  Pacific  was  separated  from  these 
terminals  there  would  have  to  be  some  division  of  the  earnings  as 
between  the  Central  Pacific  and  the  balance  of  the  roads? 

Mr.  HUNTINGTON.  Yes. 

Senator  BRICE.  Under  the  ordinary  rules  what  percentage  for  term- 
inal facilities  would  be  charged  by  a  disinterested  manager  on  the  busi- 
ness from  Ogden  to  San  Francisco? 

Mr.  HUNTINGTON.  Not  very  much. 

Senator  BRICE.  What  percentage  would  it  be? 

Mr.  HUNTINGTON.  It  would  not  be  a  percentage;  it  would  be  an 
arbitrary. 

Senator  FRYE.  I  did  not  object  to  the  cross-examination  of  Mr.  Hun- 
tington  on  the  contract  with  the  Panama  Eailroad  Company,  but  I 
desired  that  Mr.  Huntington  should  have  that  paper  when  he  was  being- 
examined,  so  that  he  should  not  be  guessing  at  its  contents.  (To  Mr. 
Hun  tin  gton.)  Can  you  have  that  paper  on  Monday? 

Mr.  HUNTINGTON.  I  would  like  to  be  in  New  York  on  Monday. 

Senator  MORGAN.  Bring  here  on  Monday  your  Kentucky  charter; 
I  want  to  ask  you  about  the  directors  and  about  the  stockholders  both 
of  the  Southern  Pacific  and  of  the  Northern  Pacific. 


104  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  We  have  dividend  warrants  and  we  are  not 
always  able  to  place  the  stockholders. 

Mr.  LITTLER.  I  want  to  offer  an  amendment  to  my  bill  so  as  to  meet 
an  objection  which  Mr.  Coombs  made.  He  said  that  there  was  no  time 
fixed  within  which  any  sum  of -money  that  might  be  found  by  the  com- 
mission should  be  paid.  I  offer  this  amendment: 

After  the  word  "six,"  ill  lino  18  of  the  printed  hill,  add  :  and  unless  said  sum  so  to 
be  found  by  the  commission  shall  have  been  paid  within  thirty  days  after  the 
approval  of  said  report,  the  United  States  shall  have  the  right  to  enforce  any  rights 
it  may  now  have  under  the  laws  as  they  may  exist. 

Senator  FRYE  (to  Mr.  Huntington).  Have  you  a  draft  of  any  bill  that 
covers  any  proposition  which  you  have  to  make? 

Mr.  HUNTINGTON.  No,  sir. 

Senator  FRYE.  The  bill  which  I  reported  involved  an  immense  amount 
of  calculation  and  study  at  the  hands  of  half  a  dozen  auditors.  You 
propose  to  fix  a  sum  certain  to  be  paid  upon  the  principal  and  upon  the 
interest? 

Mr.  HUNTINGTON.  I  asked  Mr.  Tweed  to  get  up  a  bill  of  that  sort,  and 
I  do  not  know  whether  he  has  done  so  yet.  Your  committees  are  so 
much  in  the  habit  of  adding  considerably  to  what  is  offered  that  we 
hesitate  about  offering  any  sum.  We  want  to  go  up  as  high  as  we 
can. 

Senator  BRICE.  I  suggest  that  Mr.  Huntington  shall  consult  with 
Mr.  Tweed  and  fix  upon  a  sum  to  be  offered  to  the  Government. 

Senator  FRYE  (to  Mr.  Huntington).  I  suppose  that  to  secure  that 
agreement  you  are  ready  to  assign  to  the  Government  everything  con- 
tained in  the  old  bill? 

Mr.  HUNTINGTON.  Everything. 

Senator  FRYE.  And  to  give  the  Government  all  the  security  that 
the  old  bill  proposed  to  give? 

Mr.  HUNTINGTON.  Yes;  everything  that  we  have  got,  personal,  real, 
and  mixed. 

Senator  FRYE.  Suppose  you  fix  the  payment  upon  the  principal  at 
$2,000,000  a  year,  and  payment  on  the  interest  annually  at  $1,000,000 
a  year,  you  will  be  gradually,  as  a  matter  of  course,  reducing  the 
amount  of  interest  to  be  paid  just  as  you  decrease  the  principal.  I 
want  you  to  consider  whether  or  not  after  the  lapse  of,  say,  ten  or 
twenty  years  you  can  not  increase  the  amount  of  principal  to  be  paid 
over  that  with  which  you  start  out,  and  if  so,  how  much? 

Mr.  HUNTINGTON.  It  can  be  worked  out,  but  we  can  not  pay 
$2,000,000  a  year  at  the  start. 

Senator  FRYE.  I  only  used  that  as  an  illustration. 

Mr.  HUNTINGTON.  We  will  do  the  very  best  we  can.  We  want  to 
pay  100  cents  on  the  dollar,  with  as  much  interest  as  we  can  pay. 

Senator  FRYE.  I  want  you  to  consider  the  other  proposition,  whether 
or  not  as  you  decrease  the  principal  and  also  decrease  the  interest,  you 
can  not  increase  the  annual  payments? 

Mr.  HUNTINGTON.  That  appears  to  be  reasonable  and  we  will  see  if 
we  can  not  work  it  out.  There  have  been  $50,000,000  gathered  all  over 
the  world  for  the  shares  of  the  Central  Pacific,  and  I  would  like  to  hold 
out  a  dim  hope  at  least  to  the  stockholders  that  their  shares  are  worth 
something. 

Senator  MORGAN.  If  the  Central  Pacific  is  as  good  property  as  United 
States  bonds  the  stock  will  be  valuable. 

Adjourned  until  Monday,  February  17.  at  10.30. 


GOVEENMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  105 

WASHINGTON,  February  17,  1896. 
The  committee  met  at  10.30  a.  in. 
Present,  Senators  Gear  (chairman),  Wolcott,  Frye,  Brice,  and  Morgan. 

UNION  AND   CENTRAL  PACIFIC. 
STATEMENT  OF  MR.  FRANCIS  W.  THURBER. 

Mr.  FRANCIS  W.  THURBER,  of  New  York,  appeared  before  the 
committee  and  said: 

MR.  CHAIRMAN  AND  GENTLEMEN  OF  THE  COMMITTEE  ON  PACIFIC 
EAILROADS  :  I  appear  before  you  representing  the  National  Board  of 
Trade  and  the  New  York  Board  of  Trade  and  Transportation  to  oppose 
the  idea  of  Government  ownership  of  the  Pacific  railroads  and  to  advo- 
cate the  adjustment  of  the  debt  due  to  the  Government  by  these  roads 
on  the  best  terms  practicable.  I  am  chairman  of  the  committtee  on  rail- 
road transportation  of  the  New  York  Board  of  Trade  and  Transpor- 
tation, and  have  for  many  years  studied  the  relations  of  railroads  to  the 
public.  I  have  been  one  of  the  most  strenuous  advocates  of  holding 
railroads  to  a  proper  and  just  responsibility  to  the  public.  I  am  chair- 
man of  the  committee  appointed  by  the  National  Board  of  Trade  in 
January,  1895,  to  present  to  Congress  the  views  of  the  National  Board 
of  Trade  on  the  subject  of  Government  ownership  of  railroads  and  the 
adjustment  of  the  debt  of  the  Pacific  railroads.  These  were  embodied 
in  the  following  resolutions,  unanimously  adopted  by  that  body,  which, 
as  you  are  probably  aware,  is  composed  of  delegates  from  leading 
commercial  organizations  in  the  United  States  and  is  more  fully  rep- 
resentative of  the  interests  of  the  business  public  than  any  other 
organization : 

Whereas  it  has  been  recently  proposed  that  the  Government  should  acquire  and 
operate  the  Union  and  Central  Pacific  railroads,  instead  of  extending  its  liens  thereon ; 
and 

Whereas  there  is,  perhaps,  no  branch  of  business  which  so  much  requires  for  its 
successful  conduct  the  stimulus  of  private  interest,  coupled  with  the  best  adminis- 
trative ability,  as  that  of  railroads: 

Resolved,  That  the  National  Board  of  Trade  deprecates  any  movement  looking  to 
the  Government  ownership  of  railway  lines,  but  strenuously  advocates  a  wise,  firm 
and  continuous  supervision  over  the  operation  and  management  of  these  great  agen- 
cies, in  all  matters  affecting  their  relations  with  the  public  in  the  conduct  of  inter- 
state commerce. 

Eesolved,  In  the  judgment  of  this  board  the  bonded  indebtedness  of  the  Pacific 
railroads  to  the  Government  should  be  extended  on  the  best  terms  practicable. 

It  is  doubtless  natural  that  there  should  be  found  advocates  of  the 
Government  ownership  of  the  Union  and  Central  Pacific  railroads. 
There  are  some  people  who  believe  in  the  Government  ownership  of  all 
the  great  agencies  of  communication  and  even  of  mines  and  other  indus- 
tries, but  long  and  careful  study  of  this  subject  has  convinced  me  that, 
in  a  country  and  with  a  Government  like  ours,  any  step  in  this  direction 
would  be  unwise.  Any  material  increase  in  the  number  of  Government 
employees  is  undesirable,  for  reasons  which  are  obvious  to  all  who  are 
conversant  with  our  political  system.  From  a  commercial  point  of  view 
it  is  equally  undesirable.  Political  influence  would  be  brought  to  bear  to 
carry  the  products  of  one  section  at  the  expense  of  the  other  sections, 
and  it  is  not  improbable  that  this  consideration  is  at  the  bottom  of  some 
of  the  agitation  regarding  the  Government  ownership  of  the  Pacific 
railroads. 

Kepublics  are  proverbially  ungrateful,  and  a  study  of  the  history  and 
the  relations  of  the  Pacific  railroads  to  the  public  illustrates  how  easy 


106  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

it  is  for  the  public  to  forget  the  benefits  to  the  public  of  individual 
effort.  The  history  of  the  construction  of  the  Pacific  railroads  is  an 
industrial  romance.  The  difficulties  which  were  encountered  and  over- 
come by  the  great  captains  of  industry  who  undertook  this  work  entitle 
them  to  the  consideration  and  thanks  of  the  American  people;  and, 
without  excusing  the  Credit  Mobilier  scandal  or  any  other  abuse  which 
accompanied  the  progress  of  this  great  work,  it  is  safe  to  say  that  for 
every  dollar  of  private  benefit  accruing  to  its  projectors  a  thousand 
dollars  of  benefit  has  accrued  to  the  public.  The  saving  to  the  Gov- 
ernment in  the  transportation  of  its  supplies  for  the  Army,  although 
large,  is  trifling  compared  to  the  saving  to  the  public  in  transportation 
charges.  Land  which  was  worthless  was  made  accessible  and  valuable. 
An  empire  in  extent  was  opened  up,  and  has  crystallized  into  great  and 
productive  States;  and  yet  the  pioneers  who  conceived  and  executed 
this  great  work  are  frequently  denounced  as  if  they  were  public  enemies. 

Senator  MORGAN.  Name  those  pioneers. 

Mr.  THURBER.  I  say  the  men  who  constructed  the  Union  Pacific  and 
the  Central  Pacific  railroads. 

Senator  MORGAN.  Who  are  they  ?  Just  name  the  persons  you  refer  to. 

Mr.  THURBER.  I  should  say,  for  instance,  Mr.  C.  P.  Huntington. 

Senator  MORGAN.  Who  else? 

Mr.  THURBER.  His  associates  in  the  Central  Pacific. 

Senator  MORGAN.  Name  them. 

Mr.  THURBER.  Mr.  Stanford  and  Mr.  Crocker,  and  in  the  Union 
Pacific  Mr.  Oakes  Ames.  I  do  not  remember  all  of  them,  but  the  men 
who  were  the  pioneers  in  that  work  are  the  men  I  refer  to. 

Senator  MORGAN.  All  right;  proceed. 

Mr.  THURBER.  Now,  as  to  the  plans  which  have  been  proposed  for 
the  adjustment  of  the  debt  owed  by  these  roads  to  the  Government. 
The  Government  mortgage  is  a  second  lieu.  The  first  mortgage  is 
partly  due,  and  the  rest  is  rapidly  maturing.  The  holders  are  taking 
steps  to  foreclose,  and  something  must  be  speedily  done.  By  a  cooper- 
ation of  all  the  interests  concerned  and  extending  the  time  for  the  pay- 
ment of  the  first  and  second  mortgage  bonds,  the  Government  can  be 
repaid  in  full  and  something  remain  for  the  stockholders. 

A  method  for  doing  this,  as  regards  the  Central  Pacific,  has  been 
formulated  in  a  bill  introduced  in  the  Senate  by  Mr.  Frye,  of  Maine, 
and  in  the  House  by  Mr.  Smith,  of  Illinois,  the  latter  being  H.  K.  3459 
of  the  present  Congress.  The  reorganization  committee  of  the  Union 
Pacific  have  also  submitted  to  you  a  plan  for  that  road  which  seems 
reasonable.  The  adjustment  of  the  indebtedness  of  the  Pacific  roads 
to  the  Government  would  be  an  important  starting  point  for  placing 
the  railroad  interests  of  the  country  on  a  better  basis,  and  this  would 
have  an  important  bearing  upon  the  entire  business  interests  of  the 
country.  It  will  give  confidence  to  capital  to  embark  in  new  enterprises 
and  start  the  wheels  of  industry  in  every  direction. 

The  importance  of  the  transportation  interests  of  the  country  as  a 
leader  in  industrial  activity  is  not  generally  appreciated.  It  touches 
the  business  interests  of  the  country  at  every  point.  This  is  illustrated 
by  the  fact  that  in  1893  there  were  about  874,000  men  employed  on  the 
railroads  of  the  United  States;  in  1894  this  number  had  fallen  to  about 
780,000 ;  and  since  1893  nearly  one-fourth  of  the  mileage  of  the  United 
States  has  gone  into  the  hands  of  receivers.  The  throwing  out  of 
employment  of  an  army  of  100,000  men  was  only  a  part  of  the  difficulty. 
Not  only  was  the  number  of  those  employed  decreased,  but  the  incomes 
of  those  who  remained  were  lowered.  There  was  a.general  cut  of  wages 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  107 

in  all  grades  of  the  service.  Five  thousand  general  officers  suffered  as 
well  as  100,000  track  men,  150,000  shopmen,  and  over  500,000  other  oper- 
atives. Wages  were  lowered  directly  and  time  was  reduced,  bringing 
about  the  same  result  indirectly.  Industries  depending  on  railroads 
for  a  demand  were  affected,  and  many  millions  of  people  besides  those 
actually  discharged  and  their  dependents  found  themselves  less  able  to 
buy  the  necessaries  of  life. 

During  the  year  ending  June  30,  1894,  railroad  stock,  having  a  par 
value  of  $3,660,150,094,  or  63£  per  cent  of  the  total,  received  no  dividend. 
During  the  three  years  ending  December  31,  1894,  9,178  miles  of  road, 
capitalized  at  $494,821,000,  were  sold  under  foreclosure.  From  January 
1  to  July  1, 1895,  these  totals  were  increased  by  2,049  miles,  capitalized 
at  $149,615,000,  and  2,396  miles,  capitalized  at  $100,941,000,  each 
respectively,  which  went  into  the  hands  of  receivers  and  were  sold 
under  foreclosure.  According  to  the  report  of  the  statistician  of  the 
Interstate  Commerce  Commission  for  the  year  ending  June  30, 1894,  the 
income  of  railroads  in  a  section  including  52  per  cent  of  the  area  of 
the  country  did  not  produce  enough  above  the  actual  cost  of  operation 
to  pay  their  fixed  charges  during  that  year. 

Mr.  Chairman,  when  I  began  the  study  of  the  railroad  question  twenty- 
five  years  ago,  I  felt  that  rates  were  too  high  and  that  there  was  danger 
of  the  public  being  oppressed  by  the  railroads.  I  ranged  the  commer- 
cial sentiment  of  the  country  on  the  side  of  Senator  Reagan  when  he 
was  contending  for  the  prohibition  of  pooling  in  the  inter  state  commerce 
bill,  but  the  logic  of  time  and  events  has  convinced  both  Senator  Eeagan 
and  myself  that  the  prohibition  of  pooling  was  unwise ;  that  we  need 
no  longer  fear  unduly  high  rates  for  transportation;  that  the  problem 
now  is  to  eliminate  unjust  discriminations  and  systematize  the  admin- 
istration so  that  shippers  may  enjoy  reasonable,  uniform,  and  stable 
rates,  and  carriers  may  earn  a  just  compensation  for  the  capital  honestly 
invested. 

As  an  illustration  of  the  progressive  reduction  in  the  charge  for 
transportation,  the  average  charge  for  carrying  a  ton  of  freight  one 
mile  on  13  of  the  most  important  railroads  of  the  United  States  during 
1865  was  3.08  cents;  in  1870,  1.81  cents;  in  1875,  1.36  cents;  in  1880, 
1.01  cents;  in  1885,' 0.83  cent;  in  1890,  0.77  cent;  in  1893,0.76  cent. 
These  railroads  performed  one-third  of  the  entire  freight  transportation 
during  1893,  and  from  the  figures  given  it  appears  that  0.76  cent  would 
pay  for  as  much  transportation  over  their  lines  in  1893  as  could  have 
been  obtained  for  3.08  cents  twenty-eight  years  earlier.  This  reduction, 
amounting  to  three-fourths  the  average  rate  for  1865,  has  been  exceeded 
in  that  of  the  lessened  price  of  but  few  even  of  those  articles  in  the 
manufacture  of  which  new  inventions  have  worked  the  most  radical 
changes. 

The  entire  transportation  performed  by  the  railroads  of  the  United 
Stages  during  the  twelve  years  ending  June  30, 1894,  was  equivalent  to 
moving  136,799,677,822  passengers  and  807,935,382,838  tons  of  freight 
one  mile.  Had  rates  averaging  as  high  as  those  of  1882  been  collected 
upon  this  traffic,  the  railroads  would  have  earned  $2,629,043,459  more 
than  they  actually  received  in  these  twelve  years. 

The  rates  on  the  Pacific  railroads  are  now  less  than  one- third  what 
they  were  when  the  roads  were  first  constructed,  and  this  is  an  impor- 
tant argument  in  favor  of  treating  these  roads  liberally  in  the  adjust- 
ment of  obligations  which  they  incurred,  based  upon  earnings  at  higher 
rates.  The  Government  has  aided  the  construction  of  competing  lines 
with  enormous  laud  grants,  and  thus  directly  aided  in  reducing  the 


108          GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

revenues  of  the  Union  and  Central  Pacific  railroads,  upon  which  they 
relied  to  meet  their  obligations  to  the  Government.  It  was  doubtless 
to  the  public  interest,  speaking  in  a  broad  sense,  that  this  should  be 
done,  but  the  Government  should  be  willing,  under  such  circumstances, 
to  correspondingly  modify  the  obligations  which  the  earlier  roads 
entered  into,  based  upon  conditions  then  existing,  and  which  they  had 
no  reason  to  believe  would  be  changed  by  the  power  of  the  Govern- 
ment being  exerted  to  diminish  the  income  upon  which  they  relied  to 
meet  their  obligations  to  the  Government. 

The  Fifty-fourth  Congress  has  a  great  opportunity  to  commend  itself 
to  the  country  by  promptly  passing  measures  to  adjust  the  indebt- 
edness of  the  Pacific  railroads ;  and  also  a  fair  and  reasonable  bank- 
ruptcy bill.  These  two  measures  would  go  far  to  restore  business 
prosperity,  even  if  we  do  not  get  a  solution  of  the  complex  and  much 
mooted  question  of  the  currency,  although  it  is  devoutly  to  be  wished 
that  a  wise  solution  of  this  question  may  also  be  found. 

Thanking  you,  Mr.  Chairman  and  gentlemen,  for  your  patient  hearing 
of  my  somewhat  desultory  remarks,  I  will  close. 

Senator  MORGAN.  What  institutions,  companies,  or  associations  com- 
prise the  National  Board  of  Trade? 

Mr.  THURBER.  The  leading  commercial  organizations  of  the  coun- 
try— the  Chicago  Board  of  Trade,  the  St.  Louis  Merchants'  Exchange, 
the  Cincinnati  Chamber  of  Commerce,  the  Boston  Chamber  of  Com- 
merce, the  New  York  Board  of  Trade,  and  some  thirty  others  scattered 
all  over  the  country,  and  representing  probably  the  business  of  the 
country. 

Senator  MORGAN.  Are  there  any  of  them  on  the  Pacific  Coast  ? 

Mr.  THURBER.  No,  sir. 

Senator  MORGAN.  Are  any  of  them  west  of  the  Mississippi  Kiver? 

Mr.  THURBER.  St.  Louis  may  perhaps  be  considered  so. 

Senator  MORGAN.  Was  the  St.  Louis  Merchants'  Exchange  repre- 
sented in  that  meeting  where  these  resolutions  were  adopted  ? 

Mr.  THURBER.  Yes. 

Senator  MORGAN.  Who  represented  it  ? 

Mr.  THURBER.  Ex-Governor  Stanford  was  the  chairman. 

Senator  MORGAN.  Did  any  body  else  represent  any  other  board  of 
trade  west  of  the  Mississippi  Biver? 

Mr.  THURBER.  I  think  not. 

Senator  MORGAN.  So  that  this  is  entirely  an  Eastern  recommenda- 
tion? 

Mr.  THURBER.  If  you  consider  the  Mississippi  valley  East,  it  is. 

The  CHAIRMAN.  Were  Milwaukee  and  Chicago  represented  there? 

Mr.  THURBER.  Chicago  was  represented ;  I  do  not  think  Milwaukee 
was. 

Senator  MORGAN.  Was  St.  Paul  represented  ? 

Mr.  THURBER.  St.  Paul  has  been  represented  in  the  board  of  trade  5 
but  I  do  not  think  its  representatives  were  in  the  last  meeting. 

Senator  MORGAN.  Your  speech  was  submitted  to  the  delegates  assem- 
bled from  those  different  commercial  bodies  ? 

Mr.  THURBER.  The  substance  of  my  remarks  here  was  contained  in 
a  report  adopted  by  the  board  unanimously.  Every  figure  that  I  have 
given  you  here  was  in  that  report  which  was  submitted  by  the  Commit- 
tee on  Eailroad  Transportation,  of  which  I  am  chairman. 

Senator  MORGAN.  The  particular  speech  which  you  have  made  to  us 
here  now  was  not  submitted  to  that  National  Board  of  Trade? 

Mr,  THURBER.  Yes. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  109 

Senator  MORGAN.  Just  as  you  have  presented  it  here? 

Mr.  THURBER.  With  the  exception  of  some  allusions  to  the  present 
situation. 

Senator  MORGAN.  This  is  not  the.  paper  which  the  Board  of  Trade 
adopted? 

Mr.  THURBER.  Substantially,  it  is. 

Senator  MORGAN.  Is  it  the  very  paper  ? 

Mr.  THURBER.  No,  sir. 

Senator  MORGAN.  Point  out  what  you  put  in  it  since  you  submitted 
it  to  the  Board. 

Mr.  THURBER.  I  have  simply  put  in  these  words :  "  I  appear  before 
you  representing  the  National  Board  of  Trade  and  the  National  Board 
of  Trade  and  Transportation  to  oppose  the  idea  of  Government  owner- 
ship of  the  Pacific  railroads,  and  to  advocate  the  adjustment  of  the  debt 
due  to  the  Government  by  those  roads  on  the  best  terms  practicable." 

Senator  MORGAN.  Did  you  put  in  those  words  about  the  ingratitude 
of  republics? 

Mr.  THURBER.  Yes,  sir;  that  is  in  the  report  as  adopted.  The  fact 
is  that  the  paper  I  have  read  is  nearly  verbatim  the  same,  with  the 
exception  of  where  I  speak  of  the  reorganization  committee  of  the  Union 
Pacific  Eailroad.  They  had  not  at  that  time  submitted  to  this  commit- 
tee the  plan  which  they  have  now  formulated.  I  would  be  very  glad 
to  send  you  a  copy  of  the  report  as  it  was  submitted. 

Senator  MORGAN.  Then  we  can  compare  and  ascertain  if  this  is  the 
report  that  you  made  there  and  that  was  adopted  in  substance  with 
your  gloss  upon  it. 

Mr.  THURBER.  I  do  not  know  that  I  have  glossed  it  any. 

Senator  MORGAN.  It  looks  to  me  pretty  shiny. 

Mr.  THURBER.  I  will  be  very  glad  to  send  you  a  copy  of  the  report 
verbatim  as  adopted  by  the  National  Board  of  Trade. 

Senator  MORGAN.  About  the  ingratitude  of  republics.  Do  you  think 
that  this  Republic  has  been  ungrateful  to  Mr.  Huntington  and  Mr. 
Oakes  Ames  and  the  promoters  of  those  Pacific  railroads? 

Mr.  THURBER.  I  think  that  the  people  who  denounce  Mr.  Hunting- 
ton  and  Mr.  Ames  and  others  who  were  instrumental  in  giving  the 
country  these  roads  are  very  unjust. 

Senator  MORGAN.  But  that  is  not  the  Republic,  is  it? 

Mr.  THURBER.  Perhaps  the  phrase  u  republics  are  ungrateful n  was 
used  because  it  is  familiar. 

Senator  MORGAN.  Would  you  like  to  be  put  down  as  saying  that  the 
whole  Eepublic  has  denounced  Huntington,  Ames,  and  Hopkins? 

Mr.  THURBER.  No,  sir ;  I  think  not. 

Senator  MORGAN.  It  is  only  the  people  who  denounce  them  that  you 
include  in  your  remark  as  to  republics  being  ungrateful.  You  do  not 
know  whether  they  are  Republicans  or  Democrats? 

Mr.  THURBER.  No,  sir. 

Senator  MORGAN.  In  what  sense  do  you  think  that  even  these  people 
who  have  denounced  Mr.  Huntington  and  Mr.  Ames  have  been  un- 
grateful ? 

Mr.  THURBER.  I  think  so  for  the  reason  that  they  do  not  appreciate 
the  benefits  which  they  have  received  from  the  efforts  of  these  men. 
They  make  little  of  them  and  condemn  them  when  they  should  not  do  so. 

Senator  MORGAN.  Have  you  yet  heard  of  a  man  who  engaged  in  the 
promotion  of  these  railroads  who  did  not  come  out  of  it  a  very  rich  man  ! 

Mr.  THURBER.  I  do  not  know  that  1  have. 


110  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Have  not  some  of  them  accumulated  very  enor- 
mous estates  ? 

Mr.  THURBER.  Whether  from  that  particular  source  or  not,  1  can 
not  say. 

Senator  MORGAN.  I  am  not  asking  you  the  source. 

Mr.  THURBER.  People  who  have  built  the  Pacific  railroads  as  a  rule 
are  rich  men. 

Senator  STEWART.  Did  Mr.  Ames  make  or  lose  money  in  it? 

Mr.  THURBER.  I  think  he  made  money  in  the  long  run. 

Senator  MORGAN.  Then,  in  the  sense  of  enabling  these  gentlemen  to 
become  very  rich,  the  Itepublic  has  not  been  ungrateful. 

Mr.  THURBER.  In  the  sense  that  these  railroads  through  their  develop- 
ment have  made  the  men  connected  with  them  rich,  perhaps  the  Kepublic 
has  not  been  ungrateful;  but  in  the  sense  of  indiscriminate  fault-finding 
and  censure  of  these  men,  I  think  that  any  citizen  of  the  Kepublic  who 
indulges  in  it  is  ungrateful. 

Senator  MORGAN.  Then  your  objection  is  against  liberty  of  speech 
and  criticism? 

Mr.  THURBER.  No,  sir;  I  think  every  man  should  have  the  right  to 
express  his  opinion. 

Senator  MORGAN.  I  suppose  you  do  not  know  anything  about  the  cir- 
cumstances of  Mr.  Huntington,  Mr.  Crocker,  and  Mr.  Stanford,  and  the- 
gentlemen  you  have  mentioned,  at  the  time  they  entered  into  this 
business"? 

Mr.  THURBER.  Only  what  I  have  heard. 

Senator  MORGAN.  I  do  not  want  any  hearsay.  But  you  are  aware 
that  the  estates  which  these  men  have  or  have  left  are  very  large. 

Mr.  THURBER.  I  have  heard  so. 

Senator  MORGAN.  Are  you  aware  of  any  business  in  which  any  of 
these  gentlemen  have  been  engaged  which  would  be  likely  to  magnify 
and  build  up  their  estates  to  that  enormous  extent  except  through  their 
connection  with  these  railroads? 

Mr.  THURBER.  I  do  not  know  of  any  business  they  have  ever  been 
associated  with,  excepting,  I  believe,  that  Hnutington,  Hopkins  &  Co. 
were  in  tbe  hardware  business.  I  do  not  understand  that  they  made 
their  money  in  it. 

Senator  MORGAN.  They  had  one  store,  at  what  place? 

Mr.  THURBER.  I  do  not  know;  I  think  in  Sacramento  or  San 
Francisco. 

Senator  MORGAN.  You  hardly  think  that  their  hardware  business 
developed  into  their  immense  fortunes? 

Mr.  THURBER.  I  understand  that  they  made  their  money  in  the  rail- 
road business. 

Senator  MORGAN.  In  these  railroads? 

Mr.  THURBER.  Yes;  and  others. 

Senator  MORGAN.  Are  you  connected  with  any  railroad? 

Mr.  THURBER.  No,  sir. 

Senator  MORGAN.  Have  you  any  stock  in  any  railroad? 

Mr.  THURBER.  No,  sir. 

Senator  MORGAN.  You  are  not  a  director  in  any  railroad? 

Mr.  THURBER.  No. 

Senator  MORGAN.  Are  you  an  agent  for  any  railroad? 

Mr.  THURBER.  No. 

Senator  MORGAN.  Are  you  in  any  railroad  employment? 

Mr.  THURBER.  No. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  Ill 


Senator  MORGAN.  And  you  are  entirely  neutral  on  this  subject? 

Mr.  THURBER.  Yes. 

Senator  MORGAN.  And  we  are  to  accept  your  argument  as  coming 
from  an  entirely  neutral  and  unprejudiced  source. 

You  speak  of  having  changed  your  opinion  upon  the  subject  of  pool- 
ing. Give  the  committee  the  ground  on  which  you  changed  your  opinion. 

Mr.  THURBER.  Because  the  experience  of  the  years  since  railroad 
pooling  has  been  prohibited  by  the  interstate-commerce  law,  has  been 
greater  inequality  of  rates,  and  the  railroads  that  are  complaining  of 
these  inequalities  say  that  it  is  impossible  for  them  to  remedy  the  evil, 
because  they  can  not  enforce  agreements  with  each  other,  and  they  say 
that  if  tlrey  were  given  the  power  they  could  stop  those  discriminations 
and  inequalities  which  are  so  unjust. 

Senator  MORGAN.  Unjust  to  whom  ? 

Mr.  THURBER.  Unjust  to  the  shippers. 

Senator  MORGAN.  Why  ? 

Mr.  THURBER.  Because  any  preference  which  one  shipper  gets  over 
another  in  the  way  of  business  and  charges  helps  to  build  up  the  one 
and  break  down  the  other. 

Senator  MORGAN.  Build  up  one  railroad? 

Mr.  THURBER.  No ;  build  up  one  shipper  as  against  another. 

Senator  MORGAN.  You  mean  shippers  in  the  same  location? 

Mr.  THURBER.  Sometimes  in  the  same  location  and  sometimes  in 
different  locations. 

Senator  MORGAN.  If  some  railroads  find  themselves  able  to  lower 
rates  to  figures  which  other  railroads  can  not  afford  to  take,  do  you 
think  that  that  hurts  the  shipper? 

Mr.  THDRBER.  No,  sir;  not  if  all  the  shippers  have  the  same  chance. 
But  what  I  complain  of,  and  what  shippers  generally  complain  of,  is 
that  some  men  get  advantages  which  other  men  can  not  get. 

The  CHAIRMAN.  In  other  words,  if  A  gets  rebates  which  B,  living  in 
the  same  town,  does  not  get,  that  is  to  the  injury  of  B? 

Mr.  THURBER,  Yes. 

Senator  MORGAN.  But  that  is  contrary  to  existing  law. 

Mr.  THURBER.  That  is  true,  perhaps;  but  you  can  not  reach  the  evil. 

Senator  MORGAN.  Why  can  not  you  reach  it? 

Mr.  THURBER.  Because  it  seems  impossible  to  doit.  The  Interstate 
Commerce  Commission  has  been  trying  to  do  it,  but  has  not  been  able 
to  do  it. 

Senator  MORGAN.  Why  not? 

Mr.  THURBER.  I  suppose  owing  to  the  secret  undercutting  of  rates 
which  the  different  agents  practice.  Men  who  are  honest  and  who  wish 
to  do  right  have  assured  me  that  it  is  an  utter  impossibility  for  them 
to  stop  these  things  until  they  have  the  right  to  enforce  their  contracts 
on  each  other,  which  they  are  now  prohibited  from  doing. 

Senator  MORGAN.  Take  the  railroads  of  the  United  States  as  a  mass, 
with  all  the  powers  and  wealth  and  opportunities  which  they  enjoy,  is 
not  the  remark  true  that  the  railroads  have  become  stronger  than  the 
Government? 

Mr.  THURBER.  I  do  not  think  that  is  true.  It  may  be,  in  a  sense,  in 
the  way  of  controlling  political  movements. 

Senator  MORGAN.  I  am  not  speaking  of  political  movements.  I  am 
speaking  of  the  movement  of  freight  and  passengers. 

Mr.  THURBER.  I  can  hardly  say  that  the  Government  is  engaged  in 
that  particular  business. 


112  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  We  have  enacted  a  system  of  law  here  which  lias 
met  the  approbation  of  Congress,  and  has  been  justified  by  experience 
thus  far,  and  has  been  sustained  by  many  decisions  of  the  Supreme 
Court  in  favor  of  the  control,  through  the  Interstate  Commerce  Com 
mission,  of  the  operations  of  all  the  railroads  of  the  United  States'? 

Mr.  THURBER.  Yes,  sir. 

Senator  STEWART.  When  they  cross  State  lines? 

Senator  MORGAN.  Yes;  all  interstate  roads.  And  now  the  complaint 
is  that  the  operation  of  that  law  is  not  effectual,  because  the  Interstate 
Commerce  Commission  can  not  execute  it,  as  I  understand  you. 

Mr.  THURBER.  It  is  practically  true. 

Senator  MORGAN.  And  the  railroad  companies  want  the  power  to 
inflict  penalties  on  each  other  in  order  to  compel  the  less  wealthy  lines 
to  work  up  to  the  standard  of  rates  which  the  wealthier  lines  have 
adopted  or  may  adopt? 

Mr.  THURBER.  I  do  not  understand  it.  I  would  say  that  when  the 
freight  tariff  is  established  all  the  lines  should  observe  that  tariff  and 
not  secretly  avoid  it  by  means  of  discriminations  to  shippers,  giving 
those  shippers  advantages  over  others. 

Senator  MORGAN.  The  purpose  of  the  pooling  system  to  which  you 
have  been  converted  is  to  enable  the  railroad  companies  to  establish  a 
tariff  of  rates  which  no  other  company  shall  be  allowed  to  break  in  upon? 

Mr.  THURBER.  Whatever  tariff  is  established  should  be  uniform  and 
observed  by  all  alike. 

Senator  MORGAN.  In  all  sections  of  the  country? 

Mr.  THURBER.  Oh,  no,  sir;  the  tariff  which  exists  for  a  certain  sec- 
tion. Of  course  there  will  be  as  great  a  diversity  as  there  are  condi- 
tions. There  is  nothing  perhaps  more  elastic  than  the  system  of  rail- 
road rates  in  the  United  States. 

Senator  MORGAN.  That  would  be  to  withdraw  Government  control 
over  the  railroads  of  the  country  and  to  relegate  that  authority  to  a 
commission  consisting  of  railroad  companies  that  should  have  the  right 
to  prescribe  rates  and  the  right  to  enforce  them  against  railroads  cross- 
ing State  lines. 

Mr.  THURBER.  You  should  either  do  that  or  strengthen  the  hands  of 
the  Interstate  Commerce  Commission.  You  ought  to  give  them  five 
times  the  appropriation  that  you  do  give  them,  so  that  they  could 
employ  the  proper  experts  and  talent.  The  true  policy  is  to  strengthen 
the  hands  of  the  Interstate  Commerce  Commission;  but  at  the  same 
time  do  not  take  away  from  the  railroad  companies  the  ability  to  enforce 
their  own  contracts  upon  each  other,  so  that  if  a  railroad  is  dishonest 
and  wishes  to  evade  an  agreement  which  it  has  gone  into,  it  can  be 
forced  to  observe  it. 

Senator  MORGAN.  If  we  should  quintuple  the  appropriation  for  the 
Interstate  Commerce  Commission,  and  if  the  rascality  of  the  railroads 
should  remain  as  you  describe  it,  would  we  make  any  greater  progress 
in  repressing  this  fraud  and  wrong  than  we  are  doing  now  with  the 
present  meager  appropriation  ? 

Mr.  THURBER.  If  you  did  not  accomplish  anything,  of  course  you 
would  not. 

Senator  MORGAN.  But  you  think  we  would  accomplish  something? 

Mr.  THURBER.  Yes. 

Senator  STEWART.  I  would  like  to  have  your  view  as  to  how  you 
would  frame  legislation  that  would  give  paramount  authority  to  the 
Interstate  Commerce  Commission  and  at  the  same  time  should  omit  the 
prohibition  to  railroad  companies  of  the  power  to  enforce  their  contracts 


GOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS.  113 

as  against  each  other.  How  would  you  make  the  two  operate  together 
as  one  system? 

Mr.  THURBER.  I  think  that  the  Patterson  bill  to  permit  pooling  is  a 
very  desirable  measure  in  many  respects  for  strengthening  the  hands  of 
the  Interstate  Commerce  Commission.  If  we  could  get  that  bill  passed 
it  would  be  a  long  step  in  the  direction  of  controlling  the  railroads  and 
giving  the  Interstate  Commerce  Commission  the  proper  power,  and  at 
the  same  time  it  would  allow  the  railroad  companies,  under  the  permis- 
sion of  the  Interstate  Commerce  Commission,  to  make  their  pooling 
agreements.  The  law  as  it  now  stands  should  be  amended  in  accord- 
ance with  the  recommendations  of  the  Interstate  Commerce  Commission 
to  Congress. 

Senator  STEWART.  The  idea  is  to  empower  the  Interstate  Commerce 
Commission  to  supervise  pooling  contracts  and  to  hold  the  railroad  com- 
panies under  its  control? 

Mr;  THTJRBER.  Yes,  and  to  disapprove  of  those  contracts  and  annul 
them  when  unreasonable. 

Senator  STEWART.  The  pooling  contracts  are  for  the  purpose  of  allow- 
ing railroads  a  remedy  against  each  other? 

Mr.  THURBER.  Yes. 

Senator  STEWART.  And  the  two  plans  are  to  work  together? 

Mr.  THURBER.  Yes, 

Senator  MORGAN.  You  spoke  of  the  lands  given  to  these  railroad 
companies  as  being  worthless  because  they  were  inaccessible  until  the 
railroads  were  built.  Were  they  in  fact  worthless,  or  was  it  only  because 
they  were  not  accessible  ? 

Mr.  THURBER,  That  is  all. 

Senator  MORGAN.  Only  that? 

Mr.  THURBER.  Only  that. 

Senator  MORGAN.  So  that  the  pressure  of  immigration  westward 
would  finally  have  made  those  lands  valuable,  even  without  the  assist- 
ance of  the  railroads  ? 

Mr.  THURBER.  Belatively  so,  perhaps;  but  in  proportion  as  they 
were  made  quickly  and  easily  accessible  they  were  increased  in  value. 

Senator  STEWART.  Do  you  mean  to  say  that  the  lands  in  the  interior 
could  have  been  utilized  to  any  great  advantage  without  the  railroads? 

Mr.  THURBER.  I  do  not  know.  Of  course  then?  value  depends  upon 
the  quickness  and  the  cheapness  of  accessibility. 

Senator  MORGAN.  Does  not  the  value  of  these  lands  depend  upon 
their  intrinsic  productive  power  ? 

Mr.  THURBER.  In  getting  their  products  into  the  market? 

Senator  MORGAN.  Or  in  finding  a  market  for  them  at  home? 

Mr.  THURBER.  Yes. 

The  CHAIRMAN.  Is  it  not  true  that  the  lands  in  the  western  part  of 
Iowa,  lands  three  or  four  hundred  miles  west  of  the  Missouri  Kiver, 
would  have  been  in  a  degree  practically  useless  for  farming  purposes 
by  reason  of  the  fact  that  their  products  could  not  be  hauled  to  market 
unless  those  railroads  had  been  built  in  that  country? 

Mr.  THURBER.  Undoubtedly. 

The  CHAIRMAN.  Would  they  not  have  been  confined  largely  to  pas- 
turage farming  instead  of  raising  grains? 

Mr.  THURBER.  Undoubtedly. 

Senator  MORGAN.  The  whole  South  between  Georgia  and  the  western 
limit  of  Texas,  and  as  far  north  as  Kansas  and  Tennessee,  was  filled 
up  by  a  very  thrifty,  active,  productive  people  between  the  years  1800 
PR 8 


114  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

and  1840.  Was  there  any  railroad  running  into  any  part  of  that 
country  in  1840  ? 

Mr.  THURBER.  They  had  rivers  there  and  the  country  was  accessible 
by  water,  which  the  people  of  the  West  and  Northwest  did  not  have. 

Senator  MORGAN.  With  only  that  advantaged 

Mr.  THURBER.  I  think  that  that  perhaps  was  the  chief  advantage, 
although  there  may  be  advantages  of  climate,  soil,  etc.,  which  the 
regions  I  have  mentioned  before  did  not  enjoy. 

Senator  MORGAN.  What  navigable  rivers  did  Texas  and  Kansas 
bave? 

Mr.  THURBER.  Texas  and  Kansas  did  not  develop  until  they  had 
railroads. 

Senator  MORGAN.  They  did  not? 

Mr.  THURBER.  Not  much. 

Senator  MORGAN.  We  have  to  differ  about  that  fact. 

The  CHAIRMAN.  Is  it  not  true  that  the  country  spoken  of  by  my  dis- 
tinguished colleague  has  grown  in  population  and  products  400  or  500 
per  cent  since  the  construction  of  railroads  in  that  country? 

Mr.  THURBER.  I  do  not  know  to  what  extent  they  have  increased; 
but  they  have  increased  enormously  in  value  and  productions  since  the 
building  of  the  railroads. 

Senator  MORGAN.  And  the  western  country  is  also  increasing  in 
product  and  value? 

Mr.  THURBER.  Yes;  especially  since  it  has  been  opened  up  by  rail- 
roads. 

Senator  MORGAN.  All  the  way  from  the  Gulf  of  Mexico  to  the  Cana- 
dian line? 

Mr.  THURBER.  Yes. 

Senator  MORGAN.  And  back  to  the  Pacific  Ocean? 

Mr.  THURBER.  Yes. 

Senator  MORGAN.  All  the  way  through? 

Mr.  THURBER.  Yes. 

Senator  MORGAN.  Then,  while  railroads  are  a  great  facility,  and  are, 
perhaps,  indispensable  to  the  development  of  a  country,  they  are  not 
the  whole  value  of  a  country,  are  they? 

Mr.  THURBER.  I  do  not  suppose  we  could  get  along  without  the  land. 

Senator  MORGAN.  Could  the  railroads  have  got  along  without  the 
support  of  the  industry  and  labor  of  the  people? 

Mr.  THURBER.  No,  sir;  undoubtedly  their  interests  are  mutual. 

Senator  MORGAN.  Which  is  the  supreme  interest,  the  railroads  or 
the  men  who  supply  the  produce  to  them? 

Mr.  THURBER.  I  think  that  a  man  is  superior  to  a  machine;  but  a 
man  may  not  be  able  to  exist  if  he  has  not  access  to  the  world,  and  he 
may  not  be  able  to  develop  a  country  unless  he  has  the  communication 
to  do  it  with. 

Senator  MORGAN.  Adam  and  Abraham  have  done  pretty  good  work 
in  subsisting  and  multiplying  and  replenishing  the  earth  without  the 
assistance  of  railroads. 

Mr.  THURBER.  They  were  pioneers,  undoubtedly. 

Senator  STEWART.  Did  not  the  civilized  portions  of  the  human  race 
prior  to  railroads  dwell  in  the  vicinity  of  water  transportation  of  some 
kind? 

Mr.  THURBER.  Unquestionably. 

Senator  STEWART.  And  were  the  great  interiors  of  this  country 
penetrated  to  any  great  extent  by  the  population  until  they  got  rail- 
roads 1 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  115 

Mr.  THURBER.  I  think  that  everybody  appreciates  the  situation. 

Senator  MORGAN.  I  appreciate  the  advantages  of  railroads,  I  expect, 
as  fully  as  you  do;  but  in  considering  what  their  advantages  are  to  the 
wealth  of  the  whole  country,  I  think  that  the  men  who  are  induced  by 
the  presence  of  those  instrumentalities  of  commerce  to  go  out  and  set- 
tle up  those  lands  and  open  mines  and  cut  down  forests  are,  after  all, 
the  real  contributors  to  the  railroads,  and  after  them  to  the  wealth  of 
the  country.  Do  you  not  agree  with  me  ? 

Mr.  THURBER.  I  do.  I  think  that  the  country  was  made  for  men, 
and  that  the  railroads  were  made  for  men,  and  not  men  for  the  rail- 
roads. 

Senator  MORGAN.  In  your  speech  to-day  you  have  not  made  any 
allusion  as  to  what  is  to  become  of  the  people  who  occupy  this  Western 
country  or  as  to  what  advantage  is  to  be  gained  by  them  in  this  legis- 
lation. Do  you  not  think  that  the  people  out  there  ought  to  be  the 
first  care  of  Congress  ? 

Mr.  THURBER.  I  do  not  think  you  should  neglect  the  interests  of  the 
people  in  any  part  of  the  country. 

Senator  MORGAN.  Ought  they  not  to  be  the  prime  care  of  Congress 
in  any  legislation  in  reference  to  the  dealings  of  the  Government  with 
these  railroads  in  the  future  f 

Mr.  THURBER.  Yes,  I  do.  I  think  that  the  interests  of  the  people 
should  be  the  first  interests  in  your  action;  but  at  the  same  time  it  all 
conies  down  to  a  question  of  what  is  reasonable.  There  is  reason  in 
everything,  and  I  do  not  think  that  the  people  of  the  Pacific  Coast  in 
wishing  the  Government  to  take  these  railroads  are  reasonable. 

Senator  MORGAN.  You  do  not  suppose  that  Congress  would  be  more 
unreasonable  in  favor  of  the  people  than  you  are  in  favor  of  the  rail- 
road companies  f 

Mr.  THURBER.  I  suppose  not. 

Senator  MORGAN.  You  are  very  much  opposed  to  Government  own- 
ership and  control  of  those  railroads? 

Mr.  THURBER.  Not  Government  control  of  them;  I  am  entirely  in 
favor  of  Government  control. 

Senator  MORGAN.  How  could  the  Government  control  them  if  it  does 
not  own  them1? 

Mr.  THURBER.  The  creation  of  the  Interstate  Commerce  Commission 
shows  that  you  have  that  right  and  that  power. 

Senator  MORGAN.  Is  that  the  control  of  which  you  speak? 

Mr.  THURBER.  Yes. 

Senator  MORGAN.  You  do  not  mean  that  the  Government  has  the 
right  of  controlling,  for  instance,  the  railroad  officers? 

Mr.  THURBER.  $o,  sir. 

Senator  MORGAN.  Or  the  employment  of  railroad  agents? 

Mr.  THURBER.  .No,  sir. 

The  CHAIRMAN.  Nor  the  ownership  of  the  roads? 

Mr.  THURBER.  Nor  the  ownership  of  the  roads. 

Senator  MORGAN.  If  the  Government  owned  a  railroad  and  submitted 
the  control  of  it  to  a  board  of  directors,  would  the  difficulty  exist? 

Mr.  THURBER.  1  think  it  would. 

Senator  MORGAN.  Notwithstanding  that  the  Government  might  dele- 
gate the  entire  authority  to  make  appointments  and  to  give  employment 
to  a  board  of  directors  without  the  intervention  of  any  Government 
officer  ? 

Mr.  THURBER.  Do  you  allude  to  a  board  of  directors  appointed  by 
the  Government? 


116  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  I  am  talking  about  directors  either  appointed  by 
the  Government  or  elected  by  the  stockholders. 

Mr.  THURBER.  It  is  quite  a  different  thing  if  the  directors  are 
elected  by  the  stockholders;  but  if  they  are  appointed  by  the  Gov- 
ernment, political  influence  at  once  comes  in  and  you  will  find  one 
section  of  the  country  wanting  its  products  carried  at  the  expense  of 
other  sections. 

Sena! or  MORGAN.  We  have  got  in  these  Union  and  Central  Pacific 
Railroad  Companies  the  right  to  appoint  four  Government  directors 
in  each. 

Senator  STEWART.  Not  in  the  Central  Pacific. 

Senator  MORGAN.  Well,  in  the  Union  Pacific  we  have  a  right  to 
appoint  four  Government  directors  and  the  Government  does  not  own 
any  part  of  that  railroad. 

Mr.  THURBER.  Yes,  I  understand  so.  These  directors  are  for  look- 
ing after  the  Government  interests  in  that  road. 

Senator  MORGAN.  They  are  there  and  have  the  right  to  vote  upon 
any  subject  that  conies  up  in  the  board  of  directors.  They  have  coor- 
dinate and  equal  powers  with  the  directors  elected  by  the  stockholders. 

Mr.  THURBER.  But  they  are  in  a  minority. 

Senator  MORGAN.  But  they  are  there  and  the  Government  of  the 
United  States  owns  no  interest  in  that  property,  none  whatever. 

Mr.  THURBER.  Not  directly.  Of  course  the  Government  has  its  inter- 
est in  the  securities. 

Senator  MORGAN.  That  is  a  different  thing.  The  Government  is  a 
creditor  like  any  other  creditor.  The  Government  lias  had  these  four 
directors  in  that  company  since  it  was  organized. 

Mr.  THURBER.  I  believe  so. 

Senator  MORGAN.  Appointed  by  whom? 

Mr.  THURBER.  By  the  President,  I  believe. 

Senator  MORGAN.  Without  confirmation  by  the  Senate? 

Mr.  THURBER.  I  do  not  know  how  that  is. 

Senator  MORGAN.  There  is  no  confirmation  by  the  Senate.  Has  any 
one  of  these  directors  been  appointed  on  political  grounds,  so  far  as 
you  are  aware,  or  have  you  ever  heard  a  suggestion  of  the  kind  I 

Mr.  THURBER.  I  do  not  know. 

Senator  MORGAN.  You  do  not  know  as  to  what  political  parties  they 
belong? 

Mr.  THURBER.  I  do  not  know. 

Senator  MORGAN.  Then  the  political  evil  has  not  given  to  the  Union 
Pacific  a  board  of  directors  such  as  you  contemplate  would  be  the  case? 

Mr.  THURBER.  No,  sir;  I  think  the  conditions  are  entirely  different. 

Senator  MORGAN.  Taking  the  same  situation,  and  the  exercise  of 
the  same  powers  precisely,  and  suppose  the  Government  chooses  to 
amend  the  charter  of  the  Union  Pacific  so  as  to  raise  the  number  of  the 
Government  directors  to  a  majority — just  on  the  present  conditions. 
Would  you  then  apprehend  that  political  influence  would  get  into  the 
company  and  control  it? 

Mr.  THURBER.  I  should  think  greater  danger  of  it  if  the  Govern- 
ment  had  a  majority  ot  the  directors  than  when  it  has  only  a  minority. 

Senator  MORGAN.  What  is  the  number  of  directors  in  the  Union 
Pacific? 

Mr.  THURBER.  I  do  not  know;  about  a  dozen,  I  suppose. 

Mr.  PIERCE.  I  think  there  are  fifteen. 

Senator  MORGAN.  Well,  four  is  nearly  one-third  of  that  number. 
In  a  severely  controverted  proposition  in  relation  to  the  management 


1 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  ]  1 7 

of  the  road,  as  for  instance,  creating  a  further  debt,  or  the  election  of 
a  president,  or  of  any  other  officer,  if  parties  in  the  company  directors 
should  be  equally  divided  upon  any  question  of  this  kind,  then  the 
Government  of  the  United  States,  through  its  four  directors,  could 
come  in  and  cast  its  vote  as  a  balance  of  power  and  carry  the  question 
exactly  as  it  desired. 

Mr.  THURBEB.  Yes,  yes ;  under  such  a  hypothesis  as  that. 

Senator  MORGAN.  So  that  we  are  now  in  possession  of  all  the  power 
needed  to  decide  a  question  on  this  side  or  on  that  side  in  any  contro- 
verted or  disputed  line  of  policy  that  might  be  suggested  by  the  board 
of  directors. 

Mr.  THURBER.  I  think  you  are  supposing  a  state  of  affairs  not  very 
likely  to  exist. 

Senator  MORGAN.  Suppose  I  think  it  is.  Will  you  answer  my  ques- 
tion ?  In  that  case  would  not  the  Government  of  the  United  States,  of 
its  own  authority  and  its  own  power,  without  responsibility,  without 
ownership  of  the  road,  and  in  virtue  of  the  powers  which  now  exist, 
under  the  charter,  be  able  to  cast  the  decision  of  such  questions  on  the 
one  side  or  on  the  other  side  of  any  line  of  policy  which  might  be  sug- 
gested in  a  board  of  directors  ? 

Mr.  THURBER.  Yes ;  I  should  say  so. 

Senator  MORGAN.  Then,  with  that  adaptation  of  the  law  as  it  exists, 
all  the  authority  needed  to  control  the  decisions  of  the  Union  Pacific 
Railroad  Company  on  any  question  where  the  directors  elected  by  the 
stockholders  are  divided  in  opinion,  exists  in  the  Government1? 

Mr.  THURBER.  Yes,  sir ;  if  they  are  divided. 

Senator  MORGAN.  Has  any  harm  come  from  that? 

Mr.  THURBER.  I  do  not  think  there  has,  so  far  as  I  know. 

Senator  MORGAN.  If  we  had  from  the  beginning  a  board  of  directors 
all  appointed  by  the  President  and  confirmed  by  the  Senate,  and  if 
those  men  had  been  such  honorable  persons  as  the  United  States  fur- 
nish in  multitudes — men  who  have  got  a  personal  conscience — do  you 
think  that  a  Credit  Mobilier  could  ever  have  grown  up  in  that  company? 

Mr.  THURBER.  I  think  that  you  increase  the  chances  of  corruption 
and  mismanagement  the  moment  you  let  an  enterprise  of  that  kind  get 
into  politics. 

Senator  MORGAN.  Then  you  think  it  was  the  Government  influence, 
probably,  and  not  the  influence  of  those  who  controlled  the  company  at 
that  time  that  gave  rise  to  the  Credit  Mobilier  in  the  Union  Pacific? 

Mr.  THURBER.  No;  I  would  not  say  that. 

Senator  MORGAN.  What  would  you  say? 

Mr.  THURBER.  What  I  say  is,  that  in  my  judgment  you  would  find 
greater  abuses  under  a  Government  management  of  railroad  business 
than  you  do  under  private  niaiiagement. 

Senator  MORGAN.  Take  that  specific  abuse.  Do  you  believe  that  the 
existence  of  the  Credit  Mobilier  in  the  history  of  the  Union  Pacific 
Railroad  was  due  in  the  slightest  degree  to  the  presence  of  Government 
directors  there? 

Mr.  THURBER.  No,  sir  j  I  do  not  think  it  was. 

Senator  MORGAN.  Do  you  think  it  was  due  to  the  presence  of  directors 
elected  by  the  stockholders? 

Mr.  THURBER.  I  think  that  the  Credit  Mobilier  scandal  was  a  pretty 
good  illustration 

Senator  MORGAN.  You  can  answer  my  question  without  divergence. 
Do  you  think  that  the  Credit  Mobilier  scandal  was  due  to  the  directors 
who  represented  the  private  stockholders? 

Mr.  THURBER.  I  do  not. 


118  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  What  was  it  due  to? 

Mr.  THURBER.  I  think  that  the  Credit  Mobilier  scandal  was  largely 
due  to  the  Government  having  anything  to  do  with  the  railroad.  It 
has  a  direct  bearing  upon  and  is  a  direct  illustration  of  what  may  be 
expected  if  we  have  Government  ownership  of  these  transportation  lines. 

Senator  MORGAN.  And  yet  in  that  particular  case  you  are  unable  to 
state  that  the  Government  directors  in  the  Union  Pacific  had  any  con- 
nection with  the  Credit  Mobilier  scandal? 

Mr.  THURBER.  Not  to  my  knowledge. 

(Mr.  Pierce,  in  correction  of  his  former  statement,  said  that  there  were 
fifteen  directors  in  the  Union  Pacific  representing  the  stockholders  and 
five  representing  the  Government.) 

Senator  MORGAN.  Having  exonerated  both  the  Government  direct- 
ors and  the  directors  represented  by  the  stockholders,  as  you  have  dono, 
from  connection  with  the  Credit  Mobilier,  will  you  please  inform  the 
committee  how  it  was  possible  that  that  Credit  Mobilier  could  have 
originated  and  gotten  hold  of  that  company  as  it  did  without  the  assist- 
ance of  some,  at  least,  of  the  directors  of  the  company? 

Mr.  THURBER.  1  am  not  sufficiently  familiar  with  the  details  of  the 
history  of  that  thing  to  judge,  but  I  go  upon  the  general  ground  that 
it  was  through  the  corruption  of  public  men  that  that  scandal  occurred. 

Senator  MORGAN.  You  refer,  of  course,  to  Congress? 

Mr.  THURBER.  Well,  perhaps  to  Congress ;  and  all  who  were  con- 
cerned in  it. 

Senator  MORGAN.  There  was  nobody  concerned  in  it  but  Congress- 
men. So  that  you  think  that  the  Credit  Mobilier  scandal  was  the 
result  of  the  corruptions  of  Congress? 

Mr.  THURBER.  I  do  not  know  whether  it  was  a  result  or  a  cause,  It 
was  simply  an  illustration  that  it  is  not  a  good  thing  to  get  railroads 
into  politics. 

Senator  MORGAN.  These  men  were  not  in  politics. 

Mr.  THURBER.  They  came  in  contact  with  politicians. 

Senator  MORGAN.  Did  you  ever  hear  of  any  political  question  in  the 
United  States  between  the  Credit  Mobilier  and  Congress,  or  between 
the  Credit  Mobilier  and  the  board  of  directors,  or  between  the  Credit 
Mobilier  and  anybody  else.  Was  there  ever  a  Credit  Mobilier  party  in 
the  United  States? 

Mr.  THURBER.  No;  but  there  were  a  good  many  men  interested  in 
the  Credit  Mobilier  who  were  in  public  life. 

Senator  MORGAN.  The  Credit  Mobilier,  when  brought  into  English 
terms,  was  a  company  of  construction,  was  it  not? 

Mr.  THURBER.  Subtantially  that. 

Senator -MORGAN.  Altogether  that? 

Mr.  THURBER.  I  think  so — finance  and  construction. 

Senator  MORGAN.  It  was  simply  a  company  of  construction? 

Mr.  THURBER.  Yes. 

Senator  MORGAN.  Could  that  company  ever  have  got  a  contract  from 
the  Union  Pacific  without  the  assent  of  the  board  of  directors  ? 

Mr.  THURBER.  I  should  presume  not,  although  I  do  not  know  any- 
thing about  it. 

Senator  MORGAN.  Then,  if  there  was  any  fraud  on  the  part  of  the 
Credit  Mobilier,  the  board  of  directors  were  responsible  for  it? 

Mr.  THURBER.  Probably. 

Senator  MORGAN.  Which  set  of  directors — the  Government  set  or 
the  Union  Pacific  set? 

Mr.  THURBER.  Probably  both ;  I  do  not  know. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  Il9 

Senator  MORGAN.  You  have  not  heard  that  the  Government  directors 
had  anything  to  do  with  the  Credit  Mobilier  or  with  awarding  to  it  the 
right  to  construct  the  road? 

Mr.  THURBER.  I  am  not  sufficiently  familiar  with  the  affair  to  know 
in  respect  to  its  details. 

Senator  MORGAN.  After  a  review  of  that  situation,  would  you  not 
conclude  with  me  that  if  all  the  directors  (the  twenty)  had  been  Gov- 
ernment directors,  selected  from  the  great  body  of  citizens,  men  of 
honor,  such  as  we  might  expect  to  have  appointed  by  the  President  and 
confirmed  by  the  Senate  (if  we  had  had  twenty  Government  directors 
instead  of  five),  the  Credit  Mobilier  would  never  have  seen  the  daylight? 

Mr.  THURBER.  I  can  not  answer  as  to  that. 

Senator  MORGAN.  What  is  your  opinion  as  to  that? 

Mr.  THURBER.  1  think  that  the  character  of  one  set  of  men  is  about 
as  good  as  that  of  another. 

Senator  MORGAN.  You  believe,  then,  in  the  degeneracy  of  mankind, 
and  that  all  are  susceptible  to  corruption? 

Mr.  THURBER.  No,  I  do  not  say  that.  I  believe  there  is  an  average 
human  nature;  and  of  the  class  of  men  engaged  in  this  enterprise  I 
think  that  possibly  the  Government  directors  were  no  better  than  the 
others. 

The  CHAIRMAN.  Did  you  ever  hear  of  any  opposition  among  the 
Government  board  of  directors  to  making  this  contract  to  which  Senator 
Morgan  has  referred  ? 

Mr.  THURBER.  I  am  not  so  familiar  with  the  details  of  that  scandal. 
The  point  I  make  is  this :  that  the  Government  ought  to  be  kept  out  of 
railroad  business. 

The  CHAIRMAN.  Senator  Morgan  asked  you  this  question :  Is  it  not 
presumable  to  suppose  that  the  Government  directors  gave  their  assent 
to  the  contract  when  it  was  made  ? 

Mr.  THURBER.  Keally,  1  have  no  knowledge  on  the  subject. 

The  CHAIRMAN.  Is  it  not  presumable? 

Mr.  THURBER.  I  think  it  probable. 

Senator  MORGAN.  Were  not  the  directors  of  the  Union  Pacific  at 
that  time  also  the  directors  of  the  Credit  Mobilier? 

Mr.  THURBER.  I  think  they  were. 

Senator  MORGAN.  Man  for  man? 

Mr.  THURBER.  I  do  not  know  to  what  extent,  but  that  is  my  impres- 
sion. 

Senator  MORGAN.  That  they  let  contracts  from  themselves  to  them- 
selves? 

Mr.  THURBER.  Yes. 

Senator  MORGAN.  Do  you  think  that  that  could  have  occurred  if 
there  had  been  twenty  Government  directors,  subject  to  dismissal  by 
the  President  of  the  United  States  upon  any  hint  of  improper  conduct? 

Mr.  THURBER.  I  have  no  doubt  they  would  have  been  dismissed  for 
cause. 

Senator  MORGAN.  Do  you  think  it  would  have  occurred — this  creation 
of  a  Credit  Mobilier  to  make  a  contract  with  the  directors  themselves — 
do  you  think  that  that  could  have  occurred  if  the  twenty  directors  of 
the  Union  Pacific  Railroad  Company  had  been  all  Government  directors 
instead  of  only  five  Government  directors? 

Mr.  THURBER.  I  think  that  the  construction  of  that  work  under  a 
system  of  Government  directors  would  have  developed  abuses  as  great 
as  those  that  occurred. 


120  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  You  have  a  very  convenient  way  of  not  answering 
my  question.  Please  answer  it. 

Mr.  THURBER.  Very  likely  not. 

Senator  MORGAN.  The  likelihood  would  have  been  in  favor  of  the 
proposition  that  it  would  not  have  occurred.  I  think  we  agree  upon 
that. 

Senator  FRYE.  There  never  would  have  been  a  Pacific  railroad  at  all 
if  there  had  not  been  a  Credit  Mobilier,  just  as  there  never  would  have 
been  a  Nicaragua  Canal  if  there  had  not  been  such  a  company.  You 
have  in  the  Nicaragua  Canal  and  Construction  Company  precisely  what 
the  Union  Pacific  had  in  the  Credit  Mobilier. 

Senator  MORGAN.  Not  at  all.  The  construction  company  in  the 
Nicaragua  Canal  matter  is  to  be  a  company  organized  by  the  Congress 
of  the  United  States,  in  which  (the  bill  proposes)  the  Government  shall 
have  a  majority  of  the  directors. 

Senator  FRYE.  I  am  talking  of  the  thing  as  it  is  now,  where  the  Nic- 
aragua Canal  Company  makes  a  contract  with  the  Nicaragua  Construc- 
tion Company  for  the  latter  company  to  go  on  and  build  the  Nicaragua 
Canal,  and  they  did  it  from  necessity,  precisely  as  the  Union  Pacific, 
from  necessity,  went  on  and  had  the  Credit  Mobilier  to  construct  the 
road. 

Senator  MORGAN.  The  bill  which  we  have  reported  requires  that  the 
Government  of  the  United  States  and  the  Governments  of  Nicaragua 
and  Costa  Rica  shall  have  a  very  large  majority  of  the  directors,  and 
those  directors  are  put  in  so  as  to  give  these  Governments  governmental 
control  of  the  work  and  to  prevent  the  possibility  of  a  Credit  Mobilier, 
or  anything  like  it. 

Senator  FRYE.  That  is  your  bill.  I  am  talking  about  the  old  com- 
pany. 

Senator  MORGAN.  I  am  not  responsible  for  the  old  company.  We 
are  trying  to  arrange  that  the  old  company  shall  not  do  that  thing,  if 
we  can  make  the  charter.  So  here  I  propose  that  there  shall  be  no  pos- 
sibility of  a  Credit  Mobilier,  or  anything  of  that  sort,  in  the  future  opera- 
tion of  these  railroads.  I  want  to  clean  them  out,  to  bar  them  out. 

The  CHAIRMAN.  How  are  you  going  to  accomplish  that"? 

Senator  MORGAN.  I  will  inform  the  committee  when  I  get  through 
with  the  testimony.  I  am  now  proposing  to  get  the  facts  on  record. 
(To  Mr.  Thurber. )  Have  you  studied  the  history  of  the  Union  Pacific 
and  the  Central  Pacific,  in  the  last  two  years,  closely? 

Mr.  THURBER.  1  do  not  know  that  1  have,  closely.  I  have  followed 
the  general  trend  of  the  work  as  it  appeared  in  the  public  press. 

Senator  MORGAN.  Taking  the  history  of  those  two  roads  for  the  last 
two  years,  or  three,  and  comparing  that  history  with  the  history  of  two 
other  prominent  lines  crossing  the  continent — the  Northern  Pacific  and 
the  Southern  Pacific — do  you  think  that  the  Union  and  Central  Pacific 
have  had  a  degree  of  prosperity  commensurate  with  that  of  the  Northern 
Pacific  Eailroad  in  the  last  three  years? 

Mr.  THURBER.  The  Northern  Pacific  has  not  been  very  prosperous; 
the  Central  Pacific  has  been  more  prosperous. 

Senator  MORGAN.  Take  the  two  together — the  Union  Pacific  and  the 
Central  Pacific,  that  transcontinental  line — and  compare  it  with  the 
Northern  Pacific;  which  has  had  the  greater  prosperity  in  the  last  three 
years  ? 

Mr.  THURBER.  Speaking  broadly,  I  should  say  that  the  Union  Pacific 
and  the  Central  Pacific  have  done  better  than  the  Northern  Pacific, 
although  the  Union  Pacific  has  not  of  itself. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  121 


Senator  MORGAN.  Which  has  had  the  greater  prosperity  in  the  last 
three  years,  the  Southern  Pacific  or  the  Union  Pacific? 

Mr.  THURBER.  The  Southern  Pacific. 

Senator  MORGAN.  Much  greater? 

Mr.  THURBER.  It  has  met  all  its  engagements. 

Senator  MORGAN.  And  made  money  for  its  stockholders? 

Mr.  THURBER.  I  do  not  know  to  what  extent. 

Senator  MORGAN.  It  has  a  surplus,  has  it  not? 

Mr.  THURBER.  I  do  not  know. 

Senator  MORGAN.  It  is  a  prosperous  road,  is  it  not? 

Mr.  THURBER.  It  is  a  solvent  road. 

Senator  MORGAN.  And  prosperous  ? 

Mr.  THURBER.  I  think  it  may  be  called  prosperous. 

Senator  MORGAN.  Prosperous,  even  as  compared  with  the  roads  from 
the  East  to  Chicago. 

Mr.  THURBER.  No,  sir;  I  think  not. 

Senator  MORGAN.  But  still  a  prosperous  road? 

Mr.  THURBER.  Yes. 

The  CHAIRMAN.  Is  it  not  true  that  a  large  majority  of  Western  roads, 
during  the  last  three  years,  can  not  be  called  fairly  prosperous? 

Mr.  THURBER.  That  is  true.  The  prices  of  the  securities  of  those  roads 
are,  perhaps,  a  good  index  of  their  prosperity,  because  the  prices  indi- 
cate the  profit-making  power  of  the  roads. 

Senator  MORGAN.  When  did  you  prepare  this  speech  that  you  made 
here  to-day  ? 

Mr.  THURBER.  I  had  it  copied  yesterday. 

Senator  MORGAN.  When  did  you  write  it? 

Mr.  THURBER.  I  took  it  almost  bodily  from  the  report  I  spoke  of. 

Senator  MORGAN.  When  did  you  do  that? 

Mr.  THURBER.  In  the  National  Board  of  Trade  which  met  in  Wash- 
ington. 

Senator  MORGAN.  I  am  talking  aboutthe  speech  you  made  hereto-day? 

Mr.  THURBER.  The  speech  is  the  report,  practically. 

Senator  MORGAN.  When  did  you  prepare  the  paper  which  you  read 
before  us  to-day  ? 

Mr.  THURBER.  I  really  prepared  the  whole  matter  when  the  National 
Board  of  Trade  met  here  in  January. 

Senator  MORGAN.  When  did  you  read  it  to  the  National  Board  of 
Trade? 

Mr.  THURBER.  On  the  27th  of  January. 

Senator  MORGAN.  The  whole  of  that  paper? 

Mr.  THURBER.  All  excepting  the  introductory  fringes  of  it. 

On  motion  of  Senator  Wolcott  it  was  ordered  that  a  minority  of  the 
committee  shall  have  the  right  to  sit  and  hear  statements  and  that  the 
committee  shall  hold  continuous  sessions. 

The  committee  took  a  recess  until  2  o'clock  p.  m. 

CENTBAjL  PACIFIC. 

After  the  recess  the  examination  of  Mr.  Huntington  was  resumed. 

Senator  MORGAN.  I  have  not  had  the  advantage  of  looking  over  the 
report  of  the  examination,  so  that  I  must  make  my  examination  at 
greater  length  than  it  otherwise  would  be.  In  examining  you  I  act  on 
the  supposition  that  you  know  more  about  this  business  than  any  other 
living  man,  and  inasmuch  as  the  Senate  expects  from  this  committee  a 
report  on  every  material  fact  connected  wih  the  subject  I  will  have  to 


122  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

examine  you  as  the  fountain  source  of  knowledge  in  order  to  get  a 
number  of  facts  which,  perhaps,  you  will  think  irrelevant  for  the  moment, 
but  which  occur  to  me  as  necessary. 

Mr.  HUNTINGTON.  I  will  be  glad  to  give  you,  Senator,  all  the  knowl- 
edge that  I  have;  but  you  overestimate  my  information. 

Senator  MORGAN.  The  people  of  the  State  which  I  represent  have  not 
any  interest  of  a  financial  character  to  the  value  of  a  cent  in  this  ques- 
tion, and  for  that  reason  I  have  an  absolute  neutrality.  The  first  ques- 
tion which  I  am  going  to  ask  you  is  this:  If  one  man  owned  or  con- 
trolled the  Southern  Pacific  from  New  Orleans  to  San  Francisco,  and 
the  Central  Pacific  from  its  sea  terminus  to  Ogden,  could  he  not  control 
the  business  west  from  Ogden  to  the  Pacific  Ocean,  except  that  portion 
of  it  which  would  find  an  outlet  through  the  Oregon  Short  Line1? 

Mr.  HUNTINGTON.  But  temporarily.  Perhaps  to  an  extent  tempo- 
rarily. There  are  a  great  many  railroad  properties  connected  with  the 
Union  Pacific  which  come  clear  to  the  Atlantic;  and  these  properties 
are  so  large  and  have  such  a  vast  capital  that  if  they  did  not  have 
fair  usage  at  Ogden  they  could  no  doubt  build  a  line  through  to  the 
Pacific;  and  therefore  the  Central  Pacific  would  be  a  loser,  and  a  very 
large  loser,  by  being  in  any  way  unfair  to  its  railroad  connections. 

Senator  MORGAN.  My  question  is  predicated  on  the  existing  state  of 
facts,  and  without  reference  to  whether  other  railroad  companies  might 
build  to  the  Pacific  Ocean  or  not.  And  I  repeat  it:  If  a  man  owned  all 
the  railroads  from  New  Orleans  to  San  Francisco,  and  from  San  Fran- 
cisco to  Ogden,  would  he  not  be  able  to  control  all  the  business  from  and 
to  the  Pacific  Coast,  back  and  forth,  except  such  as  might  find  its  way 
out  to  the  Eastern  market  over  the  Oregon  Short  Line! 

Mr.  HUNTINGTON.  There  are  so  many  lines  other  than  those  which  you 
mention  that,  if  the  Southern  and  Central  Pacifies  should  put  the  rates 
up  above  fair  rates,  the  Canadian  Pacific  would  take  all  the  business,  or 
the  Northern  Pacific;  or  the  Atchison  and  Santa  Fe.  They  run,  some 
of  them,  to  San  Diego,  Santa  Monica,  and  San  Pedro ;  and  all  of  them  to 
San  Francisco;  and  they  have  the  right  to  run  over  the  Central  Pacific 
on  the  same  terms  as  we  have  from  Mojave  Station  into  San  Francisco. 
So  if  we  raised  the  rates  above  what  was  fair,  these  roads  would  take 
the  business,  and  the  Union  Pacific  and  ourselves  would  suffer. 

Senator  MORGAN.  My  question  assumes  that  you  would  charge  fair 
rates,  and  that  your  competitors  would  therefore  be  compelled  to  charge 
fair  rates;  but  still  you  have  not  answered  the  question,  which  is, 
whether,  if  you  owned  the  lines  from  New  Orleans  to  San  Francisco 
and  from  there  to  Omaha,  you  would  not  be  able  to  control  the  traffic 
to  and  from  the 'Pacific,  except  that  taken  by  the  Oregon  Short  Line? 

Mr.  HUNTINGTON.  I  wish  to  answer  the  question,  Senator,  as  directly 
as  I  can.  I  should  say  it  could  be  done  only  temporarily,  if  it  could  be 
done  at  all. 

Senator  MORGAN.  And  why  temporarily? 

Mr.  HUNTINGTON.  Because  the  amount  of  capital  interested  in  having 
a  free  open  way  to  and  from  the  Pacific  would  build  a  road  to  San  Fran- 
cisco or  to  the  connection  with  the  Atchison  and  Santa  Feroad  at  Golph 
in  a  very  short  time.  That  is  not  very  far  from  the  road  in  Utah.  It 
can  not  be  more  than  three  or  four  hundred  miles,  and  could  be  built 
very  easily;  so  that  it  would  take  a  very  short  time  for  us  to  ruin  our 
own  property  in  this  way  and  not  to  hurt  these  roads  very  much. 

Senator  MORGAN.  Then  your  answer  would  be  that  you  could  control 
it  unless  these  other  railroads  should  build  a  line  from  some  point,  at 
the  west  of  the  lakes  or  east  of  the  Sierra  Nevada  Mountains,  to  the 
Pacific! 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  123 

Mr.  HUNTINGTON.  It  is  just  as  natural  that  these  great  properties 
should  take  care  of  themselves  as  it  is  that  water  should  run  down 
hill. 

Senator  MORGAN.  But  for  that  possibility  of  their  building  a  line  of 
railroad  to  the  Pacific  Ocean  you  would  say,  I  suppose,  that  the  own- 
ership of  the  Hues  I  have  indicated  would  control  the  commerce  to  and 
from  the  Pacific  Ocean? 

Mr.  HUNTINGTON.  No,  I  think  they  would  not  control  it,  because 
there  are  other  ways  for  the  traffic  to  get  in  and  out.  They  might  go 
round  Gape  Horn  by  steamers,  and  they  will  soon  have  a  road  through 
Guatemala.  All  these  routes  would  be  open,  and  even  the  farthest  one 
off  would  take  the  business  if  we  put  prices  above  what  they  ought 
to  be. 

Senator  MORGAN.  I  am  assuming  that  prices  should  not  be  above 
•what  they  ought  to  be. 

Mr.  HUNTINGTON.  Then  the  nearer  lines  would  compete.  I  under- 
stand how  to  handle  property  well  enough  so  as  not  to  get  in  the  way 
of  great  interests,  as  we  would  be  (in  that  case)  in  the  way  of  thousands 
of  miles  of  affiliated  railroads  between  the  Atlantic  Seaboard  and  Ogden. 
As  a  business  man  I  think  it  would  be  the  most  foolish  thing  we  could 
possibly  do. 

Senator  MORGAN.  I  want  answers  to  my  questions;  not  arguments. 
The  next  question  I  ask  is  this:  Is  not  the  road  from  San  Francisco  to 
Portland  and  to  other  points  in  Oregon  a  competitor  for  the  traffic  of 
the  Oregon  Short  Line,  between  Ogden  and  the  Pacific  Ocean? 

Mr.  HUNTINGTON.  To  a  certain  extent.  We  do  very  little  of  that 
business.  If  they  should  put  the  prices  up,  we  should  perhaps  do  all 
the  business. 

Senator  MORGAN.  What  is  the  name  of  that  road  from  Portland  to 
San  Francisco? 

Mr.  HUNTINGTON.  From  San  Francisco  to  the  State  line  it  was 
chartered  as  the  California  and  Oregon,  and  the  line  from  Portland  to 
the  State  line  of  California  is  called  the  Oregon  and  California.  We 
speak  of  the  whole  line  in  San  Francisco  as  the  California  and  Oregon, 
and  they  speak  of  it  in  Oregon  probably  as  the  Oregon  and  California. 

Senator  MORGAN.  That  line  is  practically  a  competitor  with  the  Ore- 
gon Short  Line  for  freights  and  passengers  to  and  from  the  East? 

Mr.  HUNTINGTON.  They  both  have  an  all-rail  connection.  Of  course, 
on  the  Central  Pacific  line  we  have  to  pass  the  Sierra  Nevada  Moun- 
tains twice. 

Senator  MORGAN.  Is  there  any  other  railroad  which  leaves  the  line 
of  the  Union  and  Central  Pacific,  and  which  reaches  the  Pacific  Ocean, 
except  the  Oregon  Short  Line? 

Mr.  HUNTINGTON.  I  do  not  know  whether  they  connect  with  the 
Northern  Pacific.  I  do  not  think  they  do.  There  is  a  line  [indicating 
on  the  map]  which  seems  to  run  out  of  that  territory.  I  should  think 
there  was  a  line  running  off  the  Union  Pacific. 

Senator  MORGAN.  Which  is  the  shorter  line — that  between  Portland 
and  San  Francisco  or  that  between  Portland  and  Ogden  ? 

Mr.  HUNTINGTON.  It  is  a  longer  line  from  Ogden  to  Portland  than 
from  Portland  to  San  Francisco. 

Senator  MORGAN.  How  much  longer? 

Mr.  HUNTINGTON.  I  have  not  the  exact  figures,  but  I  should  think  it 
is  about  300  miles  longer. 

Senator  MORGAN.  Which  road  has  the  easiest  gradients! 

Mr.  HUNTINGTON.  The  Oregon  Short  Line. 

Senator  MORGAN.  Which  is  the  better-constructed  line! 


124  GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGDON.  I  presume  the  Central  Pacific.  Jt  say  so  because 
we  build  better  than  anybody  else.  I  have  not  been  over  the  Oregon 
Short  Line. 

Senator  MORGAN.  You  do  not  know  how  it  is  constructed"* 

Mr.  HUNTINGTON.   No. 

Senator  MORGAN.  Under  what  control  is  the  Oregon  Short  Line  now  ? 

Mr.  HUNTINGTON.  I  do  not  know.  I  believe  the  Union  Pacific  has 
it.  It  went  into  the  hands  of  a  receiver,  I  think.  Whatever  informa- 
tion I  have  about  it  I  have  got  from  the  newspapers. 

Senator  MORGAN.  Under  what  control  is  the  California  and  Oregon? 

Mr.  HUNTINGTON.  The  Oregon  and  California  is  leased  by  the  South- 
ern Pacific. 

Senator  MORGAN.  It  is  under  the  control  of  the  Southern  Pacific? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  So  that  the  Southern  Pacific,  in  getting  the  traffic 
from  the  part  of  the  coast  north  of  San  Francisco,  is  in  competition 
with  the  Union  Pacific  through  the  Oregon  Short  Line? 

Mr.  HUNTINGTON.  Do  you  mean  for  the  San  Francisco  business? 

Senator  MORGAN.  No;  I  mean  for  all  the  coast  business. 

Mr.  HUNTINGTON.  To  a  very  limited  extent  they  may  be  in  one  sense 
considered  competitors;  but  our  line  is  so  much  longer  than  theirs  that 
there  is  very  little  business  done  over  our  line  except  the  local  business. 

Senator  MORGAN.  Where  do  you  get  the  main  part  of  the  business 
which  you  transact  over  the  California  and  Oregon  road? 

Mr.  HUNTINGTON.  We  take  it  at  Portland,  mostly.  I  think  there 
may  be  some  picked  up  from  the  Canadian  Pacific;  but  most  of  the 
passengers  are  local  passengers,  picked  up  at  Portland  and  taken  to 
San  Francisco. 

Senator  MORGAN.  Have  you  any  arrangement  with  the  Canadian 
Pacific  in  regard  to  that  traffic? 

Mr.  HUNTINGTON.  I  think  not  at  this  time. 

Senator  MORGAN.  Have  you  had? 

Mr.  BUNTINGTON.  I  think  we  had  some  years  ago.  The  traffic  people 
made  these  arrangements  if  they  were  made,  and  I  think  they  were.  I 
never  knew  much  about  the  details  of  them. 

Senator  MORGAN.  As  to  the  Canadian  Pacific,  can  it  penetrate  Cali- 
fornia over  your  line  as  far  as  San  Francisco? 

Mr.  HUNTINGTON.  Yes ;  we  give  them  all  fair  rates.  The  Canadian 
Pacific  controls  the  steamer  lines  from  Vancouver  to  San  Francisco. 

Senator  MORGAN.  That  arrangement,  while  it  exists,  puts  the  Cana- 
dian Pacific  in  competition  with  the  Union  Pacific  ? 

Mr.  HUNTINGTON.  Yes ;  I  think  that  was  an  arrangement  made  by 
all  the  roads.  I  do  not  think  we  ever  had  a  special  arrangement  with 
the  Canadian  Pacific. 

Senator  MORGAN.  What  do  you  mean  by  a  special  arrangement  f 

Mr.  HUNTINGTON.  I  mean  that  the  Central  Pacific  and  the  Union 
Pacific  never  made  any  arrangement  with  the  Canadian  Pacific,  but 
the  arrangement  was  made  by  all  the  roads  engaged  in  the  overland 
traffic. 

Senator  MORGAN.  Without  any  consideration? 

Mr.  HUNTINGTON.  There  was  some  agreed  percentage,  I  suppose. 

Senator  MORGAN.  You  have  no  exact  knowledge  on  the  subject? 

Mr.  HUNTINGTON.  No,  I  have  not. 

Senator  MORGAN.  Where  can  I  get  it? 

Mr.  HUNTINGTON.  I  do  not  know  j  I  expect  that  it  could  be  got  from 
our  people. 


GOVEENMENT    DEBT   OF   THE    PACIFIC   RAILROADS.  125 

Senator  MORGAN.  Whom  do  you  call  "our  people?" 

Mr.  HUNTINGTON.  Mr.  J.  0.  Stubbs  is  our  chief  traffic  man. 

Senator  MORGAN.  If  one  man  controlled  the  entire  line  from  New 
Orleans  to  Portland,  Oreg.,  and  from  San  Diego  and  San  Francisco  to 
Ogden,  could  he  not  control  the  entire  traffic  south  of  Portland  and 
west  of  the  Sierra  Nevada  Mountains  between  the  Atlantic  and  Pacific? 

Mr.  HUNTINGTON.  I  should  think  that  that  was  very  nearly  the  same 
question  as  that  which  I  have  answered.  Please  state  it  again. 

Senator  MORGAN.  If  one  man  controlled  the  entire  line  from  New 
Orleans  to  Portland,  Oreg.,  and  from  San  Diego  and  San  Francisco  to 
Ogden,  could  he  not  control  the  entire  traffic  south  of  Portland  and 
west  of  the  Eockies  between  the  Atlantic  and  Pacific? 

Mr.  HUNTINGTON.  No;  I  should  think  not.  The  Southern  Pacific 
does  not  go  to  San  Diego;  the  Atchison,  Topeka  and  Santa  Fe  does. 

Senator  MORGAN.  If  one  man  controlled  the  whole  business  there, 
would  not  that  give  him  control  of  all  the  traffic  south  of  Portland  and 
west  of  the  Eocky  Mountains? 

Mr.  HUNTINGTON.  No;  there  are  other  roads  which  come  in.  The 
Oregon  Pacific  connects  with  Willamette  Eiver,and  runs  to  Keenawha 
Bay.  They  run  steamers  from  there  to  San  Francisco,  and  that  makes 
a  good  connection  with  Portland. 

Senator  MORGAN.  If  a  man  had  this  control  which  I  speak  of  (if  he 
had  such  a  sweep  of  control  as  that),  would  not  the  Oregon  Short  Line 
and  the  line  from  Albuquerque  be  at  his  mercy? 

Mr.  HUNTINGTON.  No;  I  should  think  not. 

Senator  MORGAN.  Why? 

Mr.  HUNTINGTON.  If  he  was  a  wise  man  he  would  let  everybody  use 
his  line. 

Senator  MORGAN.  I  am  not  speaking  of  wise  men ;  I  am  speaking  of 
one  who  had  the  wisdom  of  cupidity;  I  want  to  know  what  power  he 
would  have? 

Mr.  HUNTINGTON.  If  one  man  had  all  the  avenues  of  trade  he  could 
control  the  trade;  but  that  is  not  the  case,  and  even  then  he  could  only 
control  it  temporarily. 

Senator  MORGAN.  I  just  want  to  know  what  would  be  the  power  in 
the  hands  of  one  man  having  this  control,  to  absorb  the  traffic  and  to 
put  this  railroad  company  from  Albuquerque  to  Mojave  and  the  Oregon 
Short  Line  in  his  power  ? 

Mr.  HUNTINGTON.  If  a  man  owned  all  the  roads  I  can  not  pretend  to 
say  what  he  would  do. 

Senator  MORGAN.  I  do  not  put  it  on  the  question  of  ownership,  but 
on  the  question  of  control. 

Mr.  HUNTINGTON.  Control  would  be  the  same  thing  as  far  as  opera- 
tion is  concerned.  If  he  controlled,  of  course  it  is  no  matter  how  he 
controlled. 

Senator  STEWART.  Does  that  question  include  the  control  of  the 
Atlantic  and  Pacific,  and  of  the  Oregon  Short  Line,  and  of  the  other 
roads  which  come  through  to  the  Pacific  Ocean? 

Senator  MORGAN.  My  question  includes  the  entire  line  from  New 
Orleans  and  Portland,  Oreg.,  to  San  Diego,  San  Francisco,  and  Ogden. 

Senator  STEWART.  There  is  no  line  running  from  San  Diego  to  Ogden 
direct. 

Senator  MORGAN.  I  know;  I  want  to  know  whether,  if  a  man  had 
that  control,  he  would  not  have  the  control  of  the  Pacific  and  Atlantic 
traffic — the  traffic  to  the  East  and  West — and  whether,  in  such  condi- 
tions and  under  such  circumstances,  he  would  not  be  the  master  and 


126  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

ruler  of  the  Albuquerque  and  Mojave  road,  and  also  of  the  Oregon 
Short  Line? 

Mr.  HUNTINGDON.  If  he  controlled  all  these  roads  he  would  have  the 
control  of  the  position  temporarily. 

Senator  MORGAN.  He  would  not  want  much  more,  would  he,  to  con- 
trol the  traffic  across  the  continent  between  the  Atlantic  and  Pacific? 

Mr.  HUNTINGTON.  He  would  have  a  very  poor  property  if  he 
attempted  to  control  it  to  the  disadvantage  of  other  companies. 

Senator  MORGAN.  But  he  would  not  want  much  else  in  the  way  of 
power,  would  he? 

Mr.  HUNTINGTON.  He  would  have  the  power  but  temporarily. 

Senator  MORGAN.  I  want  to  know  about  the  conditions  which  exist, 
not  about  those  which  are  prospective  and  conjectural. 

Senator  STEWART.  Would  it  include  the  Northern  Pacific,  which 
goes  to  deep  water,  and  the  Oregon  Short  Line,  which  also  goes  to  deep 
water? 

Senator  MORGAN.  My  question  includes  the  Oregon  Short  Line  and 
the  road  from  Albuquerque  to  Mojave.  I  want  to  know  whether  these 
roads  would  not  be  in  a  box  and  at  the  mercy  of  a  man  who  owned  the 
railroads  from  New  Orleans  to  San  Francisco  and  San  Diego  and  out 
to  Omaha? 

Senator  STEWART.  Would  that  affect  the  Canadian  Pacific  with  a 
line  of  steamers  to  San  Francisco  and  San  Diego? 

Mr.  HUNTINGTON.  It  seems  to  me,  Senator  Morgan,  that  it  is  so  easy 
to  get  around  that  that  if  I  was  charging  anything  more  than  fair  rates 
they  would  run  steamers  from  San  Francisco,  which  is  a  very  cheap  way 
of  transporting  persons  and  property. 

Senator  MORGAN.  I  am  not  counting  on  the  competition  of  rates,  but 
I  am  counting  on  the  advantages  which  a  man  would  have  who  con- 
trolled the  line  from  New  Orleans  to  San  Francisco  and  San  Diego,  and 
then  from  San  Francisco  and  San  Diego  to  Omaha  over  lines  such  as 
those  from  Albuquerque  to  Mojave  and  the  Oregon  Short  Line.  I  want 
to  know  what  the  material  power  of  such  an  aggregation  of  control  in 
the  hands  of  one  man  would  be  for  the  purpose  of  holding  down  and 
keeping  in  check  these  competitive  roads? 

Mr.  HUNTINGTON.  I  suppose  we  have  only  one  way  of  judging  of  the 
future,  and  that  is  by  the  past,  and  I  do  not  think  that  one  great  rail- 
road ever  dared,  up  to  this  time,  to  shut  up  another.  When  the  Southern 
Pacific  had  a  road  to  El  Paso,  the  Texas  Pacific  arrived  there,  and  we 
gave  them  the  same  rates  as  we  charged  ourselves.  When  the  Atchi- 
son,  Topeka  and  Santa  Fe  got  to  Mojave  (about  400  miles  from  San 
Francisco),  we  at  once  gave  them  the  best  rates — best  for  them  and 
best  for  ourselves.  We  thought  so  because  they  have  been  there  ever 
since,  for  a  number  of  years,  and  if  we  had  not  given  them  the  best 
rates,  of  course  they  would  have  moved  on. 

Senator  STEWART.  Assuming  the  question  asked  you  by  Senator 
Morgan  that  one  party  owned  the  road  from  Portland 

Senator  MORGAN.  No,  that  is  not  my  question;  from  New  Orleans. 

Senator  STEWART.  Would  the  ownership  of  the  road  from  New 
Orleans  to  San  Diego  interfere  with  the  traffic  of  the  Atlantic  and 
Pacific  to  San  Francisco,  over  the  Central  Pacific,  according  to  present 
contracted  prices  ? 

Senator  MORGAN.  From  New  Orleans  to  San  Francisco  and  San  Diego, 
and  from  San  Francisco  and  San  Diego  to  Omaha.  That  is  the  line  I 
am  talking  about  being  in  the  control  of  one  man. 


GOVERNMENT    DEBT   OF    THE    PACIFIC    RAILROADS.  127 

Senator  STEWART  (to  Mr.  Huntington).  Would  that  interfere  with 
the  Atlantic  and  Pacific  going  to  San  Francisco  under  existing  con  tracts? 

Mr.  HUNTINGTON.  It  would  not. 

Senator  STEWART.  Would  that  interfere  with  the  Atchison  and 
Topeka  going  to  San  Diego? 

Mr.  HUNTINGTON.  Certainly  not.  We  have  nothing  to  do  with  that 
line  at  all. 

Senator  STEWART.  Would  that  interfere  with  the  Oregon  Short 
Line  going  to  Portland  and  running  a  line  of  steamers  from  Portland 
to  San  Francisco? 

Mr.  HUNTINGTON.  Not  in  the  least. 

Senator  STEWART.  Would  that  interfere  with  the  Northern  Pacific, 
which  runs  to  Puget  Sound  and  which  runs  steamers  from  there  down 
the  coast? 

Mr.  HUNTINGTON.  It  would  not. 

Senator  STEWART.  Would  it  interfere  with  the  Canadian  Pacific, 
which  runs  across  the  continent  and  has  a  line  of  steamers  at  its  ter- 
minus? 

Mr.  HUNTINGTON.  No. 

Senator  STEWART.  None  of  them  would  be  blocked  up  by  means  of 
the  ownership  of  the  road  from  New  Orleans  to  Portland  and  to 
Omaha? 

Mr.  HUNTINGTON.  No. 

Senator  STEWART.  All  these  ways  would  still  be  open? 

Mr.  HUNTINGTON.  Oh,  yes. 

Senator  FRYE.  And  the  Great  Northern? 

Mr.  HUNTINGTON.  Yes;  I  omitted  that. 

Senator  MORGAN.  The  Senator  from  Nevada  thinks  that  my  question 
involves  the  ability  to  block  up  these  roads.  It  does  not.  I  am  speak- 
ing of  your  ability  to  compel  the  Oregon  Short  Line  and  the  road  from 
Albuquerque  to  Mojave  to  make  freight  terms  with  you  and  to  come  to 
your  terms  whenever  you  want  to  raise  the  rates. 

Mr.  HUNTINGTON.  The  Union  Pacific  would  take  its  freight  by 
steamer  from  San  Francisco  to  Portland  and  would  then  use  the  Oregon 
Short  Line,  and  we  could  not  interfere  with  that  at  all. 

Senator  MORGAN.  When  they  reached  Portland  and  were  met  there 
by  the  same  rates  as  the  Southern  Pacific  rates,  could  you  not,  if  you 
owned  these  roads  that  I  have  mentioned,  compel  the  Oregon  Short 
Line  and  the  road  from  Albuquerque  to  Mojave  to  come  to  your  terms, 
no  matter  whether  these  terms  suited  the  people  or  not? 

Mr.  HUNTINGTON.  Oh,  no. 

Senator  MORGAN.  Would  it  not  give  you  the  ability  of  forcing  these 
other  roads  to  raise  their  rates? 

Mr.  HUNTINGTON.  Oh,  no. 

Senator  MORGAN.  State  why. 

Mr.  HUNTINGTON.  They  can  take  goods  from  San  Francisco  on 
steamers  to  Portland,  there  put  them  on  the  Oregon  Short  Line  and 
take  them  to  Ogden,  and  they  would  have  a  good  line. 

Senator  MORGAN.  How  would  that  line,  with  two  breakages  of 
traffic,  compete  with  your  line? 

Mr.  HUNTINGTON.  The  Southern  Pacific  has  two  breakages  of  traffic 
to  New  York,  and  yet  it  does  considerable  business. 

Senator  MORGAN.  But  a  line  which  has  competition  with  the  South- 
ern Pacific  to  New  York  has  to  make  the  same  breakages  of  traffic  you 
have. 


128  GOVERNMENT   DEBT    OF   THE    PACIFIC   RAILROADS. 

Mr.  HUNTINGTON.  Yesj  but  they  have  all-rail  lines  across  the  conti- 
nent and  it  is  about  three  or  four  thousand  miles  shorter. 

Senator  MORGAN.  If  I  did  not  know  that  you  were  a  very  public- 
spirited  man,  in  favor  of  the  people  having  fair  rates,  I  would  be  afraid 
of  trusting  this  power  to  you. 

Mr.  HUNTINGTON.  I  am  sorry  for  it,  because  "out  of  the  abundance 
of  the  heart  the  mouth  speaketh."  I  never  would  have  thought  that 
of  you. 

Senator  MORGAN.  Thought  what? 

Mr.  HUNTINGTON.  What  you  have  said. 

Senator  MORGAN.  I  have  said  that  if  I  were  not  satisfied  that  you 
were  a  friend  of  the  people  I  would  hate  to  put  that  power  in  your 
hands. 

Mr.  HUNTINGTON.  Excuse  me,  I  take  that  back,  all  I  said. 

Senator  MORGAN.  You  would  not  be  afraid  to  trust  yourself  with  it? 

Mr.  HUNTINGTON.  No;  I  would  rather  trust  myself  tha*n  anybody 
else  I  know  of. 

Senator  MORGAN.  What  roads  are  under  the  control  of  the  Southern 
Pacific  Eailroad  Company'? 

Mr.  HUNTINGTON.  I  do  not  know  that  I  can  name  them  all.  It  con- 
trols the  Oregon  and  California ;  but  it  is  by  a  lease  which  can  be 
broken  at  any  time.  Then  it  controls  the  San  Francisco  Northern,  and 
the  Southern  Pacific  of  California.  We  consolidated  a  good  many  of 
those  little  roads  in  California  under  the  Southern  Pacific  Eailroad  of 
California,  and  I  can  not  tell  you  just  how  many  of  them  there  are. 
We  control  the  California  Pacific.  The  Northern  California  is  not  con- 
solidated with  the  Southern  Pacific  Company.  There  is  a  distinction 
between  the  Southern  Pacific  Company  and  the  Southern  Pacific  of 
California.  We  control  the  Southern  Pacific  of  California,  the  Southern 
Pacific  of  Arizona,  the  S  ?uthern  Pacific  of  New  Mexico,  the  Louisiana 
Western,  and  the  Morgan,  Louisiana  and  Texas  in  Louisiana.  As  I 
remember,  that  is  all. 

Senator  MORGAN.  You  have  no  road  east  of  New  Orleans  under  the 
Kentucky  corporation  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Have  you  had  anyf 

Mr.  HUNTINGTON.  No ;  I  think  not. 

Senator  MORGAN.  So  that  this  line  in  its  outer  terminals  begins  at 
New  Orleans  and  goes  to  Portland,  Oreg.? 

Mr.  HUNTINGTON.  Yes;  I  think  so. 

Senator  MORGAN.  And  in  its  reach  it  consolidated  the  various  minor 
lines  which  you  have  been  speaking  of? 

Mr.  HUNTINGTON.  Yes;  there  were  quite  a  number  of  short  lines  in 
California  which  could  not  be  run  as  separate  lines,  and  we  consoli- 
dated them  for  the  sake  of  economy. 

Senator  MORGAN.  You  are  speaking  of  consolidation,  and  I  am 
speaking  of  control;  I  want  to  know  what  lines  the  Kentucky  com- 
pany owns  or  controls  in  the  West.  You  have  not  mentioned  the 
Central  Pacific. 

Mr.  HUNTINGTON.  No.  The  Southern  Pacific  has  leased  the  Central 
Pacific.  That  is  a  short  lease,  subject  to  abrogation  at  any  time. 

Senator  MORGAN.  You  have  not  bought  all  these  other  roads ;  you  lease 
them,  too,  do  you  not? 

Mr.  HUNTINGTON.  No;  the  Southern  Pacific  of  California  controls 
them ;  that  company  was  organized  to  economize  the  workings  of  these 
roads,  and  they  exchanged  shares  with  the  Southern  Pacific  Com- 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  129 


pany  so  that  most  of  these  lines  are  owned  by  the  Southern  Pacific 
Company. 

Senator  MORGAN.  But  that  is  not  the  case  as  respects  the  Central 
Pacific? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  These  other  roads  which  you  control  are  not  owned 
by  this  Kentucky  company  under  this  programme  of  exchanging  shares. 
I  speak  of  roads  which  you  do  not  own,  but  which  you  control.  Have 
you  mentioned  them  all? 

Mr.  HUNTINGTON.  I  think  I  have  mentioned  them  all.  There  are 
some  little  roads  in  California  which  I  may  have  left  out,  but  I  think  not. 

Senator  MORGAN.  Are  you  the  president  of  the  Kentucky  company? 

Mr.  HUNTINGTON.  Of  the  Southern  Pacific  Company?    Yes. 

Senator  MORGAN.  Then  it  seems  you  ought  to  know  what  railroads 
you  are  president  of. 

Mr.  HUNTINGTON.  I  am  president  of  the  Southern  Pacific  Company. 
Each  of  those  small  companies  keeps  up  its  organization,  but  it  is  not 
an  expensive  organization.  At  one  time  there  were  very  many  more 
than  there  are  now,  but  I  do  not  recollect  them  all.  When  I  want  to 
know  a  thing  in  the  office  I  ring  the  bell  and  see  the  man  who  does 
know  it. 

Senator  MORGAN.  Then  we  are  examining  the  wrong  man.  I  want 
to  examine  the  man  who  knows  all  about  it.  If  you  will  give  me  the 
name  of  the  man  who  does  know  I  will  send  for  him. 

Mr.  HUNTINGTON.  I  think  I  know  all  that  I  suppose  is  material. 

Senator  MORGAN.  That  is  what  I  supposed  when  I  set  out  to  examine 
you.  Who  is  the  president  of  the  Southern  Pacific  of  California? 

Mr.  HUNTINGTON.  Mr.  Charles  F.  Crocker,  as  I  remember. 

Senator  MORGAN.  What  is  the  length  of  that  line? 
*  Mr.  HUNTINGTON.  The  Southern  Pacific  of  California?    We  are  add- 
ing a  little  to  it  almost  every  day.     I  think  it  is  about  1,600  miles. 

Senator  MORGAN.  Who  is  the  president  of  the  San  Francisco 
Northern  ? 

Mr.  HUNTINGTON.  I  do  not  know  that  I  can  answer  that  question. 

Senator  MORGAN.  It  has  a  president? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  a  board  of  directors? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  are  the  terminals  of  that  road? 

Mr.  HUNTINGTON.  San  Francisco  and  Tehama,  I  should  say. 

Senator  MORGAN.  That  is  in  the  direction  of  Portland  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  line  lies  between  that  and  Portland? 

Mr.  HUNTINGTON.  The  California  and  Oregon. 

Senator  MORGAN.  What  are  the  terminals  of  that  road  ? 

Mr.  HUNTINGTON.  Eoseville  and  Coles. 

Senator  MORGAN.  Does  that  road  get  to  Portland  over  its  own  line? 

Mr.  HUNTINGTON.  No ;  the  Oregon  and  California  takes  it  up  there. 

Senator  MORGAN.  What  are  the  terminals  of  the  California  and 
Oregon  ? 

Mr.  HUNTINGTON.  The  same  southern  end,  Coles,  and  at  the  north, 
Portland. 

Senator  MORGAN.  Who  is  president  of  that  line? 

Mr.  HUNTINGTON.  I  do  not  know ;  I  can  send  you  his  name  to-morrow. 

Senator  MORGAN.  Who  is  president  of  the  California  and  Oregon? 

Mr.  HUNTINGTON,  Mr,  Eequa,  that  is,  part  of  the  Central  Pacific, 


130  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  It  is  consolidated  with  the  Central  Pacific! 

Mr.  HUNTINGDON.  Yes. 

Senator  MORGAN.  Has  it  a  separate  board  of  directors? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  What  is  the  length  of  that  line? 

Mr.  HUNTINGTON.  Two  hundred  and  ninety-seven  miles. 

Senator  MORGAN.  Does  it  run  through  a  good  country? 

Mr.  HUNTINGTON.  Yes;  most  of  the  way  it  is  very  good. 

Senator  MORGAN.  What  is  the  length  of  the  line  which  is  called  the 
Oregon  and  California? 

Mr.  HUNTINGTON.  It  is  about  800  miles. 

Senator  STEWART.  Do  you  mean  the  whole  line? 

Mr.  HUNTINGTON.  We  have  lines  through  the  Willamette  Valley 
which  all  belong  to  this  organization,  something  between  seven  and 
eight  hundred  miles. 

Senator  STEWART.  Of  roads  in  Oregon? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Will  you  state  what  companies  have  made  what 
you  call  an  interchange  of  stock  with  the  Southern  Pacific? 

Mr.  HUNTINGTON.  The  Southern  Pacific  of  California,  the  Southern 
Pacific  of  New  Mexico,  the  Southern  Pacific  of  Arizona,  the  Morgan 
Company,  and  the  Louisiana  and  Western. 

Senator  MORGAN.  These  companies  have  all  made  an  interchange  ox 
stock  with  the  Southern  Pacific? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Have  they  given  up  their  separate  organizations? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  To  what  extent  has  this  exchange  of  stock  been 
made? 

Mr.  HUNTINGTON.  Substantially,  all  of  their  stock. 

Senator  MORGAN.  That  is  to  say,  that  they  would  give  you  an  amount 
of  stock  of  their  respective  roads  equal  to  the  amount  of  stock  which 
they  get  in  the  Southern  Pacific? 

Mr.  HUNTINGTON.  Yes ;  on  a  graded  basis  of  value — not  necessarily 
share  for  share. 

Senator  MORGAN.  Are  these  the  only  roads  which  have  made  this 
interchange  of  stock? 

Mr.  HUNTINGTON.  The  Galveston,  Harrisburg  and  San  Antonio  of 
Texas  is  another. 

Senator  MORGAN.  After  that  interchange  of  stock  took  place,  the 
roads  were  practically  one  as  to  ownership  from  New  Orleans  clear  up 
to  San  Francisco  ? 

Mr.  HUNTINGTON.  A  majority  of  the  shares  were,  I  think. 

Senator  MORGAN.  The  stockholders  of  the  Southern  Pacific  of  New 
Mexico  were  stockholders  in  your  road  ? 

Mr.  HUNTINGTON.  Yes;  they  exchanged  their  shares,  and  the  shares 
were  put  in  a  trust.  We  took  the  shares  of  the  Southern  Pacific  of 
New  Mexico  and  we  put  them  in  the  hands  of  a  trustee. 

Senator  MORGAN.  Was  that  a  permanent  arrangement  made  under 
the  authority  of  the  law,  or  was  it  a  mere  contract  or  deal,  made  under 
the  authority  of  a  trust? 

Mr.  HUNTINGTON.  I  suppose  it  was  legal.  The  Southern  Pacific 
was  authorized"  to  buy  the  shares  and  they  bought  them. 

Senator  MORGAN.  I  do  not  know  whether  it  was  a  mere  private  con- 
tract or  whether  the  law  authorized  it. 

Mr.  HUNTINGTON.  The  law  authorized  it. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  131 

Senator  MORGAN.  Do  you  mean  the  laws  of  the  different  States  and 
Territories  from  which  these  several  roads  derived  their  charter  power? 

Mr.  HUNTINGDON.  I  do  not  know  that  there  was  an  article  in  any 
special  law  authorizing  a  man  to  sell  his  own.  I  did  not  understand 
that  there  was  an  owner  of  a  share  of  stock  who  had  not  the  right  to 
sell  it;  and  the  Southern  Pacific  had  a  special  right,  by  legislation,  to 
buy  it,  or  to  buy  anything. 

Senator  MORGAN.  That  would  cover  the  case;  then  the  relations 
existing  between  these  different  corporations  and  the  corporation  of  the 
Southern  Pacific  is  that  the  Southern  Pacific  is  the  real  owner  of  the 
stock  of  each  of  these  corporations,  without  their  having  broken  up 
their  separate  legal  organization,  or  their  boards  of  directors? 

Mr.  HUNTINGTON.  It  can  not  be  that. 

Senator  MORGAN.  It  is  not,  then,  a  real,  actual  consolidation  f 

Mr.  HUNTINGTON.  Oh,  no. 

Senator  MORGAN.  So  that  the  Southern  Pacific  does  not  seem,  in  the 
eyes  of  the  law,  as  the  legal  representative  of  all  the  rights  and  powers 
of  each  of  these  companies  thus  included  within  its  orgauzation? 

Mr.  HUNTINGTON.  As  I  understand  it,  the  companies  would  seem 
like  any  other  shareholders,  neither  more  nor  less. 

Senator  MORGAN.  Which  of  the  roads  of  California  that  are  under 
lease  to  the  Southern  Pacific  are  not  included  in  these  arrangements 
for  the  interchange  of  stock? 

Mr.  HUNTINGTON.  I  am  inclined  to  think  that  the  Southern  Pacific 
Company  has  the  majority  of  the  shares  of  all  the  companies  in  Cali- 
fornia; that  the  board  of  directors  of  the  Southern  Pacific  controls  all 
of  them  except  the  Central  Pacific. 

Senator  MORGAN.  Has  the  Southern  Pacific  any  stock  of  the  Cen- 
tral Pacific? 

Mr.  HUNTINGTON.  I  think  not. 

Senator  MORGAN.  But  the  individuals  in  the  Southern  Pacific  have 
stock  of  the  Central  Pacific  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  To  what  extent? 

Mr.  HUNTINGTON.  Not  very  great. 

Senator  MORGAN.  Give  a  percentage. 

Mr.  HUNTINGTON.  I  do  not  know  really.  I  have  not  looked  at  cne 
books.  It  is  a  dividend-warrant  stock,  like  a  bond  with  coupons.  We 
found  in  dealing  in  that  stock  all  over  the  world  that  it  was  incon- 
venient for  holders  of  it  to  have  to  get  their  dividends  in  the  ordinary 
way.  and  we  set  to  work  to  fix  up  something  like  a  bond,  so  that  div- 
idends are  paid  on  dividend  warrants  just  like  coupons,  and  so  we  have 
them  made  in  that  way. 

Senator  MORGAN.  In  whatever  way  you  contrive  to  get  the  ownership 
represented,  about  what  is  the  percentage  of  the  stock  of  the  Central 
Pacific  which  is  owned  by  the  stockholders  of  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  do  not  know.  It  is  not  very  large.  We  have 
had  to  part  with  these  Central  Pacific  shares  to  pay  the  old  indebted- 
ness, and  we  have  not  got  very  many  shares.  I  am  not  a  large  share- 
holder. 

Senator  MORGAN.  Is  there  any  stock  issued  by  the  Kentucky  com- 
pany? 

Mr.  HUNTINGTON.  To  the  Central  Pacific? 

Senator  MORGAN.  To  anybody? 

Mr.  HUNTINGTON.  Oh,  yes. 

Senator  MORGAN,  That  company  has  issued  stock  I 


132  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  It  has  issued  stock  for  shares. 

Senator  MORGAN.  How  much  stock  lias  that  company  issued! 

Mr.  HTJNTINGTON.  I  think  something  over  one  hundred  millions. 

Senator  MORGAN.  You  are  president  of  that  company  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Are  you  the  president  of  the  Southern  Pacific  of 
California? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Who  is? 

Mr.  HUNTINGTON.  Mr.  Charles  F.  Crocker. 

Senator  MORGAN.  Who  is  the  president  of  the  Central  Pacific! 

Mr.  HUNTINGTON.  Mr.  Eequa. 

Senator  MORGAN.  For  what  was  this  $100,000,000  of  stock  issued? 
Was  it  for  cash  paid  in  ? 

Mr.  HUNTINGTON.  No;  it  was  issued  for  stock. 

Senator  MORGAN.  Was  there  no  cash  paid  in  ? 

Mr.  HUNTINGTON.  Whatever  the  charter  called  for  was  done.  Per- 
haps there  was  no  cash  called  for  or  paid  in. 

Senator  MORGAN.  Then  it  was  a  corporation  based  upon  the  shares 
of  other  companies? 

Mr.  HUNTINGTON.  Yes ;  it  was  a  corporation  to  economize  the  work- 
ings of  many  roads.  It  was  organized  for  that  purpose. 

Senator  MORGAN.  How  much  stock  have  you  got  in  the  Kentucky 
corporation  ? 

Mr.  HUNTINGTON.  I  may  have  five  or  six  millions. 

Senator  MOKGAN.  Is  there  any  larger  stockholder  than  yourself? 

Mr.  HUNTINGTON.  I  do  not  know.  I  should  not  wonder  if  Governor 
Stanford  had  more  stock  than  I  have. 

Senator  MORGAN.  Have  you  a  list  of  the  stockholders  in  the  Ken- 
tucky company  ? 

Mr.  HUNTINGTON.  Yes.    I  have  not  got  it  with  me. 

Senator  MORGAN.  Is  it  in  town? 

Mr.  HUNTINGTON.  No ;  but  I  can  get  it  very  easily. 

Senator  MORGAN.  Have  you  the  book  which  shows  to  whom  the 
shares  belong? 

Mr.  HUNTINGTON.  No,  we  have  not  got  that.  It  is  a  dividend-war- 
rant stock,  like  a  coupon  bond. 

Senator  MORGAN.  Is  it  not  an  extraordinary  arrangement  to  issue 
stock  and  to  have  no  books  to  show  who  the  stockholders  are? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Is  there  no  transfer  book? 

Mr.  HUNTINGTON.  Oh,  yes. 

Senator  MORGAN.  If  1  understand  this  peculiar  arrangement,  it  is 
like  a  coupon  bond  which  can  be  transferred  by  delivery? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Not  registered? 

Mr.  HUNTINGTON.  No;  there  is  a  great  convenience  in  this. 

Senator  MORGAN.  But  a  great  inconvenience  to  those  who  want  to 
find  out  who  own  the  stock. 

Mr.  HUNTINGTON.  I  do  not  see  what  object  anybody  would  have,  il 
there  are  so  many  shares  out,  to  know  where  they  are. 

Senator  MORGAN.  The  creditors  might  be  very  hungry  to  find  out 
who  owned  the  stock,  and  the  Government  of  the  United  States  might 
want  to  know  it,  too.  Inasmuch  as  no  money  was  paid  for  the  stock  of 
the  Kentucky  company,  what  was  paid  for  it? 

Mr,  HUNTINGTON,  There  was  aii  exchange  of  stock. 


GOVERNMENT  DEBT  OF  THE  PACIFIC  RAILROADS.         133 

I  Senator  MORGAN.  And  you  got  five  millions,  or  morel 
Mr.  HUNTINGTON.  Yes. 
Senator  MORGAN.    What  did  you  give  for  that? 
Mr.  HUNTINGTON.  I  had  some  shares  in  the  Louisiana  company  (the 
organ  company),  and  I  had  some  in  the  Western  Pacific  Company 
(a  good  many),  and  I  had  some  in  the  Texas  and  New  Orleans;  I  had 
some  in  the  Galveston,  Harrisburg  and  San  Antonio;  I  had  some  in 
the  Southern  Pacific  of  New  Mexico;  I  had  some  in  the  Southern 
Pacific  of  Arizona;  some  in  the  Southern  Pacific  of  California;  some 
in  the  San  Francisco  Northern,  and  some  in  the  Oregon  and  California, 
I  had  some  in  all  of  these  companies. 

Senator  MORGAN.  Did  you  have  any  in  the  Central  Pacific? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  transfer  that  stock! 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Have  you  got  it  yet? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  much? 

Mr.  HUNTINGTON.  Not  a  great  many  shares.  I  suppose  I  have  got 
four  or  five  thousand  shares. 

Senator  MORGAN.  How  much  money  would  that  represent  on  the  face 
value? 

Mr.  HUNTINGTON.  One  thousand  shares  represent  $100,000. 

Senator  MORGAN.  And  you  have  got  four  or  five  thousand  shares, 
about  $500,000? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Was  anybody  admitted  into  this  Kentucky  com- 
pany except  persons  who  were  shareholders  in  those  roads  you  have 
been  just  mentioning  and  which  were  put  under  the  control  of  this 
company? 

Mr.  HUNTINGTON.  No,  I  do  not  think  so.  If  anybody  wanted  shares, 
of  course  they  could  buy  them. 

Senator  MORGAN.  It  was  a  grouping  of  the  shares  of  the  shareholders 
of  these  respective  companies,  delivered  into  the  treasury  of  this  Ken- 
tucky company,  ai*d  in  place  of  these  shares  this  warrant  stock  which 
you  speak  of  (transferable  by  delivery)  was  issued  to  the  various  share- 
holders ? 

Mr.  HUNTINGTON.  Yes ;  it  was  a  transfer. 

Senator  MORGAN.  So  that  the  man  who  put  in  his  shares  of  these 
various  companies  into  the  Kentucky  company,  and  got  his  warrant 
stock,  was  no  longer  a  stockholder  in  these  various  companies! 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  It  was  a  cancellation  of  his  ownership  of  stock  in 
these  various  companies? 

Mr.  HUNTINGTON.  Hardly  a  cancellation.  The  stock  was  put  in  the 
hands  of  trustees.  The  business  was  done  directly  between  the  com- 
pany and  the  shareholders. 

Senator  MORGAN.  Has  anybody  who  owns  this  ambulatory  stock 
(this  warrant  stock)  the  right  to  go  to  the  treasury  of  the  Kentucky 
company  and  demand  that  his  shares  in  the  other  companies  which  he 
put  in  there  should  be  delivered  to  him  on  the  surrender  of  his  warrant 
stock  ? 

Mr.  HUNTINGTON.  Oh,  no;  it  does  not  belong  to  him. 

Senator  MORGAN.  Does  this  arrangement  for  the  warrant  stock 
absorb  all  the  stock  of  these  railroad  companies? 

Mr.  HUNTINGTON.  I  think  not  all,  but  a  large  majority  of  it. 


134  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROAD 

Senator  MORGAN.  Was  not  the  plan  to  liave  enough  in  th'  hands  of 
the  respective  stockholders  to  qualify  them  under  the  law  to  become 
directors  ? 

Mr.  HUNTINGDON.  That  we  had  to  do. 

Senator  MORGAN.  It  was  your  plan  to  work  down  to  that  scale? 

Mr.  HUNTINGDON.  It  was  subject  to  everybody  to  exchange  or  not  to 
exchange. 

Senator  MORGAN.  Your  plan  was  to  convert  the  stock  of  all  these 
corporations  into  this  warrant  stock  so  that  the  Kentucky  corporation 
would  become  the  representative  in  law  and  in  fact  of  the  interests 
which  these  gentlemen  had  in  these  respective  roads 5  what  is  that 
short  of  a  purchase  of  these  roads? 

Mr.  HUNTINGTON.  I  suppose  it  is  a  purchase.  The  object  was  not 
to  change  shares,  but  to  get  up  an  organization  to  economize  the  work- 
ing of  the  roads  to  the  farthest  possible  extent,  and  to  aid  the  people 
of  the  country  through  which  these  roads  pass  by  giving  them  the 
lowest  possible  rates  of  freight. 

Senator  MORGAN.  We  may  assume  that  for  all  practical  purposes 
except  the  question  of  legal  organization  the  Kentucky  company  is 
the  owner  of  these  roads,  and  is  entitled  to  the  proceeds  of  the  roads 
and  entitled  to  officer  them. 

Mr.  HUNTINGTON.  That  would  go,  I  suppose.  It  would  follow  the 
shares. 

Senator  MORGAN.  It  is  entitled  to  manage  and  does  manage  the 
actual  business  of  all  these  roads? 

Mr.  HUNTINGTON.  It  manages  the  traffic. 

Senator  MORGAN.  Has  the  Kentucky  company  assumed  the  debts  of 
all  of  these  corporations  ? 

Mr.  HUNTINGTON.  I  think  so.  We  always  kept  our  road  pretty 
clean,  without  any  floating  debt. 

Senator  MORGAN.  So  that  whatever  mortgage  rested  on  these  prop- 
erties, or  whatever  floating  debt  may  have  been  incurred  in  the  opera- 
tion of  these  roads,  have  become  now  the  debt  of  the  Kentucky  com- 
pany? 

Mr.  HUNTINGTON.  Not  necessarily,  as  I  understand  it,  although  I 
am  not  learned  in  the  law.  I  would  take  a  mortgage  to  bind  whoever 
held  the  stock.  The  mortgage  would  hold  the  property;  and  if  the 
owners  did  not  pay,  the  mortgagee  would  take  the  property. 

Senator  MORGAN.  I  want  to  know  whether  you  did  assume  the  debt 
ornot? 

Mr.  HUNTINGTON.  I  think  not. 

Senator  MORGAN.  Then  your  Kentucky  company  does  not  feel  obli- 
gated to  pay  the  debts  included  in  any  mortgage  given  by  either  of 
those  companies  absorbed  by  it? 

Mr.  HUNTINGTON.  I  do  not  know;  but  I  think  not,  to  any  consider- 
able extent.  Of  course,  if  the  debt  was  not  paid,  the  mortgagee  would 
take  the  property. 

Senator  MORGAN.  Have  you  not  been  going  on  paying  the  debts  of 
the  companies? 

Mr.  HUNTINGTON.  Yes,  we  have  paid  the  debts  currently.  I  do  not 
know  that  any  of  the  mortgage  debt  has  been  due  yet  on  the  Southern 
road.  We  never  have  defaulted. 

Senator  MORGAN.  Have  any  of  the  bonds  become  actually  due  on 
any  of  these  roads? 

Mr.  HUNTINGTON.  I  think  not  upon  any  that  are  worked  by  the 
Southern  Pacific. 


GOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS.  135 

Senator  MORGAN.  You  mean  by  the  Kentucky  road? 

Mr.  HUNTINGDON.  Yes.  I  think  not;  but  if  any  has  become  due  we 
issue  another  to  take  its  place. 

Sen  ator  MORGAN.  Suppose  that  a  creditor  of  one  of  those  strangu- 
lated companies  wished  to  proceed  to  foreclose  his  mortgage,  and  that 
the  property  of  the  company  was  not  worth  enough  to  pay  the  mort- 
gage debt;  what  would  happen? 

Mr.  HUNTINGTON.  Exactly  what  you  mean  by  a  strangulated  com- 
pany I  do  not  quite  understand. 

Senator  MORGAN.  I  will  explain  after  awhile. 

Mr.  HUNTINGTON.  I  do  not  see  the  point  exactly. 

Senator  MORGAN.  If  it  be  more  convenient,  I  will  call  it  a  company 
choked  down. 

Mr.  HUNTINGTON.  We  have  not  any  of  those,  and  I  do  not  exactly 
know  how  to  answer  your  question. 

Senator  MORGAN.  Suppose  that  one  of  those  companies,  which  should 
be  unfortunate  enough  not  to  be  able  to  conduct  its  own  business  but 
had  to  merge  itself  into  this  great  Kentucky  corporation,  should  not  be 
able  to  pay  the  mortgage  debt  resting  on  its  property,  has  the  Kentucky 
corporation  made  any  engagement  by  which  it  pays  that  debt? 

Mr.  HUNTINOTON.  I  suppose  they  would  stand  just  like  any  other 
stockholder.  I  do  not  know  of  any  difference  between  them  and  any 
other  stockholders  in  relation  to  a  transaction  of  that  kind. 
.  Senator  MORGAN.  In  the  betterments  of  the  road,  in  the  improve- 
ments and  repairs  between  New  Orleans  and  the  northern  terminus — 
say  Portland,  Oreg. — are  these  betterments  charged  up  to  each  particu- 
lar company  separately,  or  are  they  put  into  one  general  account? 

Mr.  HUNTINGTON.  I  think  that  when  we  once  build  a  road,  and  the 
construction  account  is  closed,  the  repairs  go  to  the  current  expenses. 

Senator  MORGAN.  In  this  Kentucky  company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  I  want  to  know  whether  the  current  expenses  of 
these  other  companies  are  paid  by  the  Kentucky  company. 

Mr.  HUNTINGTON.  They  are  paid  by  the  operating  company,  so  far 
as  I  know. 

Senator  MORGAN.  That  is  the  Kentucky  company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  So  that  if  one  of  these  roads  was  subjected  to  some 
great  misfortune,  the  loss  of  a  bridge  or  otherwise,  the  Kentucky  com- 
pany would  make  the  repairs  and  charge  it  to  its  own  account. 

Mr.  HUNTINGTON.  I  do  not  know.  I  think  that  any  extraordinary 
expenses  of  that  kind  (just  how  far  I  do  not  know)  would  be  borne  by 
the  Southern  Pacific  Company,  just  the  same  as  by  any  other  share- 
holders. 

Senator  MORGAN.  So  that,  for  betterments  and  repairs  and  the  loss 
of  profits,  you  do  not  keep  a  separate  account  in  the  books  of  the  Ken- 
tucky company  with  each  of  these  separate  organizations? 

Mr.  HUNTINGTON.  I  understand  that  we  do. 

Senator  MORGAN.  And  then  you  charge  up  whatever  losses  fall  upon 
them? 

.   Mr.  HUNTINGTON.  Not  necessarily;  we  like  to  know  how  the  account 
stands. 

Senator  MORGAN.  You  do  it  for  information  and  not  for  business. 

Mr.  HUNTINGTON.  We  do  it  because  it  is  a  proper  thing  to  do. 

Senator  MORGAN.  Is  there  any  charge  against  either  of  those  com- 
panies for  the  losses  which  may  be  sustained  011  its  particular  account? 


136  GOVERNMENT    DEBT    OF    THE   PACIFIC    RAILROADS. 

Mr.  HUNTINGDON.  It  would  be  well  to  know  just  how  it  was;  I  think 
that  is  the  way  we  do  it. 

Senator  MORGAN.  Well,  what  is  the  way  you  do  it? 

Mr.  HUNTINGDON.  We  pay  all  those  things  which  go  to  the  current 
expenses,  although  there  may  be  some  small  things  which  are  not  cov- 
ered in. 

Senator  MORGAN.  Is  not  this  whole  line  of  railroad,  represented  by 
the  Kentucky  company,  kept  as  one  line,  and  are  not  all  the  earnings 
of  the  whole  line  credited  to  the  Kentucky  company,  and  all  the  charges 
and  expenses  charged  to  it? 

Mr.  HUNTINGTON.  We  keep  an  account  of  the  earnings  and  expenses 
of  the  separate  companies. 

Senator  MORGAN.  Do  you  charge  it  up  to  them? 

Mr.  HUNTINGTON.  The  bookkeeping  shows  how  it  is.  The  operating 
company  pays  the  ordinary  operating  expenses. 

Senator  MORGAN.  You  do  not  seem  to  know  how  it  is. 

Mr.  HUNTINGTON.  I  think  I  do. 

Senator  MORGAN.  If  you  know  it  you  can  state  it.  I  want  to  know 
whether  you  keep  a  separate  account  against  each  one  of  these  com- 
panies. 

Mr.  HUNTINGTON.  We  do ;  I  am  pretty  sure  of  that. 

Senator  MORGAN.  In  which  account  you  charge  them  with  all  the 
expenses  of  operating. 

Mr.  HUNTINGTON.  I  think  it  runs  just  as  though  you  and  I  owned 
the  shares  instead  of  the  Southern  Pacific  owning  them. 

Senator  MORGAN.  Do  you  charge  the  companies  with  the  salaries  of 
the  officers? 

Mr.  HUNTINGTON.  They  do  not  get  much  salary.  I  do  not  think  they 
get  any  salary. 

Senator  MORGAN.  Well,  the  other  expenses.  Do  you  charge  them 
with  the  expenses  of  the  repairs  of  track? 

Mr.  HUNTINGTON.  That  is  current  expenses,  and  the  Southern  Pacific 
company  pays  them  as  shareholders  in  those  companies.  They  are  run 
just  as  though  the  shares  belonged  to  Senator  Morgan  and  myself. 

Senator  MORGAN.  These  accounts,  I  suppose,  are  stated  annually? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  At  the  end  of  the  year,  if  any  one  of  these  com- 
panies is  found  to  have  absorbed  more  of  the  money  of  the  general 
company  than  it  was  entitled  to  (after  deducting  expenses  of  repairs 
and  keeping  the  line  in  order),  could  you  state  an  account  against  that 
company,  and  sue  it,  to  recover  the  balance  in  favor  of  the  general  com- 
pany, or  not? 

Mr.  HUNTINGTON.  I  do  not  know.  I  think  that  none  of  these  things 
have  occurred  yet.  We  have  had  no  extraordinary  repairs. 

Senator  MORGAN.  Is  it  possible  that  such  a  thing  might  occur  under 
the  arrangement  absorbing  the  stock  and  virtually  putting  control  of 
all  the  lines  in  the  Kentucky  company  ? 

Mr.  HUNTINGTON.  I  do  not  think  that  the  Southern  Pacific  Company 
has  any  power  because  it  holds  these  shares,  any  more  than  any  other 
private  shareholder  has. 

Senator  MORGAN.  To  come  directly  to  the  point,  is  not  the  Kentucky 
company  the  owner  of  these  lines  of  railroad  from  end  to  end,  from 
New  Orleans  to  Portland,  Oreg.? 

Mr.  HUNTINGTON.  Not  all  the  way.  It  does  not  own  any  shares  of 
the  Central  Pacific.  I  think  it  has  a  majority  of  the  shares  of  the  other 
companies. 


GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS.  137 

Senator  MORGAN.  Is  not  this  Kentucky  company  regarded  as  the 
owner  of  these  lines  of  railroad  from  New  Orleans  to  Portland,  Oreg., 
except  the  Central  Pacific? 

Mr.  HUNTINGTON.  The  Southern  Pacific  has  a  majority  of  the  shares 
of  the  various  companies.  I  do  not  know  that  that  carries  any  more 
rights  than  other  shareholders  have. 

Senator  MORGAN.  But  in  so  far  as  it  owns  a  majority  of  the  shares 
the  Kentucky  company  is  the  owner  of  these  lines'? 

Mr.  HUNTINGTON.  Yes;  it  has  a  majority  of  the  votes. 

Senator  MORGAN.  Can  either  of  those  intermediate  corporations  give 
orders  to  any  man  who  runs  a  train  or  performs  any  other  kind  of  work 
011  the  line  thus  under  the  control  of  the  Kentucky  company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Please  name  an  instance  in  which  the  orders  of 
any  of  the  intermediate  companies  would  be  respected! 

Mr.  HUNTINGTON.  My  opinion  is  that  the  Galveston,  Harrisburg  and 
San  Antonio  road  is  running  with  its  own  officers. 

Senator  MORGAN.  Is  any  other  company  doing  so? 

Mr.  HUNTINGTON.  I  guess  that  the  Texas  and  New  Orleans  is. 

Senator  MORGAN.  Any  other? 

Mr.  HUNTINGTON.  I  do  not  think  now  of  any  other. 

Senator  MORGAN.  Then,  with  these  two  companies  the  Kentucky 
company  made  special  arrangements,  differing  from  the  arrangement 
with  the  others? 

Mr.  HUNTINGTON.  Yes;  I  think  so. 

Senator  MORGAN.  Yoif  found  it  necessary,  in  order  to  get  their  coop- 
eration, to  make  a  special  arrangement  with  these  companies  that  their 
own  officers  should  run  their  line. 

Mr.  HUNTINGTON.  That  is  a  fact,  I  think. 

Senator  MORGAN.  By  virtue  of  the  fact  that  you  made  a  special 
arrangement  for  that  purpose. 

Mr.  HUNTINGTON.  I  do  not  know  how  it  is,  but  it  is  so. 

Senator  MORGAN.  Does  this  corporation  pay  any  dividends  on  its 
stock  ? 

Mr.  HUNTINGTON.  I  am  sorry  to  say  that  it  does  not. 

Senator  MORGAN.  Has  it  paid  all  of  its  current  expenses? 

Mr.  HUNTINGTON.  It  has.  It  is  one  of  the  cleanest  corporations  in 
the  country,  I  think. 

Senator  MORGAN.  Has  it  paid  the  interest  on  its  bonds? 

Mr.  HUNTINGTON.  It  has  never  defaulted  a  coupon  on  any  bond. 

Senator  MORGAN.  Has  it  reduced  traffic  charges  and  made  the  work 
more  economical  over  the  whole  extent  of  the  line  than  when  the  roads 
were  running  separately? 

Mr.  HUNTINGTON.  Oh,  yes. 

Senator  MORGAN.  Very  materially? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  would  be  the  percentage  of  reduction? 

Mr.  HUNTINGTON.  I  think  that  prices  have  gone  down.  Last  year 
the  rates  were  less  than  12  mills  per  mile  per  ton,  and  I  think  we  used 
to  get  2£  cents  a  mile. 

Senator  MORGAN.  That  is  a  reduction  of  freight. 

Mr.  HUNTINGTON.  And  there  was  a  reduction  of  expenses  to  corre- 
spond. We  practice  the  most  rigid  economy. 

Senator  MORGAN.  Are  you  earning  more  than  your  necessary  ex- 
penses'? 

Mr.  HUNTINGTON.  We  always  have  a  little  to  the  good. 


138  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  What  is  the  amouiit  of  the  reserve  fund? 

Mr.  HUNTINGTON.  It  is  very  little. 

Senator  MORGAN.  About  how  much? 

Mr.  HUNTINGTON.  About  one  million  dollars,  or  so. 

Senator  MORGAN.  Where  is  that  money  kept? 

Mr.  HUNTINGTON.  It  is  kept  in  San  Francisco  and  along  the  road. 

Senator  MORGAN.  It  is  kept  in  different  banks  and  places  where  you 
may  want  to  use  it? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Where  is  the  business  office  of  the  Kentucky  com- 
pany? 

Mr.  HUNTINGTON.  We  keep  an  office  in  Kentucky  and  we  keep  an 
office  in  San  Francisco.  The  working  office  is  in  San  Francisco. 

Senator  MORGAN.  Have  you  an  office  in  New  York? 

Mr.  HUNTINGTON.  Yes;  we  keep  an  office  there. 

Senator  MORGAN.  The  head  office  is  in  New  York? 

Mr.  HUNTINGTON.  I  think  it  can  hardly  be  called  the  head  office. 
The  president  lives  in  New  York,  but  the  working  office  is  in  San 
Francisco. 

Senator  MORGAN.  In  which  of  those  offices  are  the  reports  collected? 

Mr.  HUNTINGTON.  Of  course  you  can  get  the  reports  in  the  New  York 
office  or  the  San  Francisco  office. 

Senator  MORGAN.  I  want  to  know  to  which  office  these  different 
employees  of  the  railroad,  big  and  little,  are  required  to  report. 

Mr.  HUNTINGTON.  To  the  office  at  San  Francisco. 

Senator  MORGAN.  So  that  the  San  Francisco  office  is  the  main  office 
of  the  company. 

Mr.  HUNTINGTON.  It  is  the  main  office  for  the  operations  of  the 
company. 

The  CHAIRMAN.  Are  you  required  by  law  to  keep  an  office  in  San 
Francisco  ? 

Mr.  HUNTINGTON.  I  presume  so.    We  do  keep  it  there. 

Senator  MORGAN.  The  statute  under  which  you  are  operating  is,  I 
understand,  a  Kentucky  statute. 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  that  supplies  all  the  law  which  controls  your 
action  f 

Mr.  HUNTINGTON.  I  hardly  know  how  to  answer  that  question.  We 
have  the  right  to  buy  shares,  with  other  things.  We  buy  them  and 
own  them,  and  the  ownership  of  these  shares,  of  course,  takes  control 
of  the  property. 

Senator  MORGAN.  The  legislatures  of  Arizona,  Louisiana,  New  Mex- 
ico, and  California  have  not  contributed  any  powers  to  this  Kentucky 
company?  It  gets  all  its  powers  from  the  Kentucky  legislature? 

Mr.  HUNTINGTON.  We  got  the  power  to  buy  shares. 

Senator  MORGAN.  Whatever  powers  you  have  you  got  from  the  Ken- 
tucky legislature. 

Mr.  HUNTINGTON.  The  companies  have  franchises  from  the  several 
States  to  run  the  roads. 

Senator  MORGAN.  Has  any  legislature,  besides  the  Kentucky  legis- 
lature, given  any  official  recognition  of  the  existence  of  the  Kentucky 
company? 

Mr.  HUNTINGTON.  No;  not  that  I  know  of. 

Senator  MORGAN.  So  that  the  powers  of  that  company  come  from 
the  Kentucky  legislature.  Do  you  do  any  business  in  Kentucky? 

Mr.  HUNTINGTON.  We  have  an  office  there. 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS.  139 

Senator  MORGAN.  Do  you  do  any  business  there? 

Mr.  HUNTINGTON.  No ;  we  are  not  allowed  to  build  roads  in  Ken- 
tucky. We  can  buy  a  charter  of  a  road  in  Kentucky,  or  we  can  buy 
shares  of  a  road  in  Kentucky,  but  we  have  no  power  to  go  to  work  as 
an  organization  and  build  a  road  in  Kentucky. 

Senator  MORGAN.  So  that,  in  getting  your  charter,  Kentucky  pro- 
hibits you  from  building  a  road  in  that  State. 

Mr.  HUNTINGTON.  It  is  a  charter  to  go  anywhere  in  the  world  and  do 
business  where  we  had  a  right  to  do  it.  We  merely  went  to  the  legis- 
lature of  Kentucky  and  got  a  charter;  but  that  charter  of  itself  gives 
us  no  right  to  build  a  railroad  in  Kentucky. 

Senator  MORGAN.  On  the  contrary,  it  positively  prohibits  you  from 
doing  so. 

Mr.  HUNTINGTON.  I  think  so.  The  charter  was  drawn,  to  a  certain 
extent,  under  our  supervision,  and  we  did  not  suppose  that  the  legis- 
lature would  give  us  a  right  to  build  a  railroad  under  a  charter  of  that 
kind.  If  we  wanted  to  build  a  road  there,  I  have  no  doubt  that  the 
legislature  would  give  us  authority  to  build  it;  but  it  did  not. 

Senator  MORGAN.  Then  you  had  a  railroad  charter  in  Kentucky  with 
the  prohibition  against  your  building  a  railroad  in  that  State? 

Mr.  HUNTINGTON.  We  did  not  have  the  right  to  go  over  the  State 
and  build  railroads  where  we  liked. 

Senator  MORGAN.  Did  not  the  Kentucky  legislature  refuse  to  give 
you  any  charter  at  all  until  you  consented  not  to  build  a  railroad  ? 

Mr.  HUNTINGTON.  Not  at  all.  We  would  not  ask  a  roving  charter 
to  go  anywhere  and  build  a  railroad,  and  I  do  not  suppose  any  State  in 
the  Union  would  grant  it.  At  the  same  time  I  am  certain  that  we 
could  go  to  the  Kentucky  legislature  and  get  the  right  to  build  a  rail- 
road in  Kentucky,  reasonably  located,  from  point  to  point. 

Senator  MORGAN.  You  say  the  stock  of  the  Central  Pacific  has  been 
taken  up  by  this  Kentucky  company  ? 

Mr.  HUNTINGTON.  Excuse  me.  The  Southern  Pacific  Company  has 
no  stock  in  the  Central  Pacific. 

Senator  MORGAN.  None  at  all? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  No  stockholder  of  the  Central  Pacific  has  ever 
exchanged  his  stock  with  the  Southern  Pacific? 

Mr.  HUNTINGTON.  No;  I  am  sure  of  it.  No  stockholder  of  the  Cen- 
tral Pacific  was  ever  asked  to  exchange  it. 

Senator  MORGAN.  You  never  would  permit  that? 

Mr.  HUNTINGTON.  We  would  not  ask  it  to  be  done. 

Senator  MORGAN.  All  of  the  control  of  this  great  line  of  railroad, 
reaching  from  Portland,  Greg.,  to  New  Orleans,  including  the  lateral 
roads,  is  in  a  corporation  chartered  in  Kentucky,  with  one  office  in  New 
York  and  one  in  San  Francisco  (the  main  office)  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  business  is  done  in  the  New  York  office? 

Mr.  HUNTINGTON.  Some  considerable  part  of  the  executive  business 
is  done  there.  A  majority  of  the  board  of  directors  is  in  San  Francisco. 
We  buy  material  in  New  York.  I  have  always  bought  the  material  for 
all  the  roads  myself.  There  is  something  coming  up  every  day  in  New 
York  that  fas  to  be  attended  to.  All  the  coupons  and  warrants  are 
paid  in  New  York. 

Senator  MORGAN.  Has  this  Kentucky  company  also  connection  by  sea 
with  other  companies  ? 

Mr.  HUNTINGTON.  No;  the  Southern  Pacific  has  not. 


140  GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  It  has  no  business  connections  by  sea? 

Mr.  HUNTINGTON.  It  lias  ships  running  on  the  Gulf  of  Mexico  and 
it  lias  ships  running  to  New  York. 

Senator  MORGAN.  Take  the  Occidental  and  Oriental  Line  of  steam- 
ships. Is  that  under  the  control  of  the  Kentucky  company  ? 

Mr.  HUNTINGTON.  No;  we  have  nothing  to  do  with  the  Pacific  Ocean. 

Senator  MORGAN.  And  you  have  no  contract  or  business  arrange- 
ment with  any  ships  on  the  Pacific? 

Mr.  HUNTINGTON.  I  think  not.  The  Occidental  and  Oriental  Line  is 
controlled  by  the  Union  Pacific  and  the  Central  Pacific. 

Senator  MORGAN.  Now,  as  to  the  Atlantic.  You  do  own  lines  of 
ships  that  run  from  New  Orleans  to  New  York? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  many  ships  have  you? 

Mr.  HUNTINGTON.  I  think  twenty,  all  belonging  to  that  company. 

Senator  MORGAN.  What  company  do  you  mean? 

Mr.  HUNTINGTON.  The  Southern  Pacific  Company. 

Senator  MORGAN.  I  call  it  the  Kentucky  company. 

Mr.  HUNTINGTON.  We  always  call  it  the  Southern  Pacific  Company. 

Senator  MORGAN.  And  you  have  twenty  ships? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Steamships  ? 

Mr.  HUNTINGTON.  Yes;  we  have  no  sailers. 

Senator  MORGAN.  What  is  about  the  burden  of  these  ships? 

Mr.  HUNTINGTON.  The  carrying  capacity  of  the  heavier  ones  is 
about  5,000  tons. 

Senator  MORGAN.  The  probable  average  is  4,500  tons? 

Mr.  HUNTINGTON.  No;  they  would  not  average  over  4,000  tons. 
And  we  have  a  line  to  Vera  Cruz. 

Senator  MORGAN.  So  that  you  have  80,000  tons  of  steamships  in 
your  control? 

Mr.  HUNTINGTON.  No;  I  do  not  think  they  would  average  4,000 
tons.  I  question  if  they  would  average  over  3,000  tons. 

Senator  MORGAN.  Do  you  build  your  ships  or  do  you  buy  them? 

Mr.  HUNTINGTON.  We  built  four  of  the  larger  ones  at  Newport 
News.  Some  we  built  in  Philadelphia,  and  some  in  Wilmington. 

Senator  MORGAN.  These  ships  are,  out  and  out,  the  property  of  the 
Kentucky  company? 

Mr.  HUNTINGTON.  Of  the  Southern  Pacific  Company;  I  think  so. 

Senator  MORGAN.  Were  they  built  on  credit  or  were  they  built  for 
money  ? 

Mr.  HUNTINGTON.  Partly  money  and  partly  credit. 

Senator  MORGAN.  How  much  money  and  how  much  credit? 

Mr.  HUNTINGTON.  I  should  have  to  go  back  to  the  accounts  for  that. 

Senator  MORGAN.  Well,  about  how  much? 

Mr.  HUNTINGTON.  We  generally  made  certain  payments  upon  them, 
and  we  usually  got  twelve  months  on  part  of  them. 

Senator  MORGAN.  You  are  not  in  debt  for  them  now  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  They  are  all  paid  for? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  are  they  worth? 

Mr.  HUNTINGTON.  I  suppose  that  twelve  of  them  are  worth  somewhere 
about  $400,000  apiece. 

Senator  MORGAN.  And  the  other  eight? 

Mr.  HUNTINGTON.  They  are  not  worth  so  much. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  141 

Senator  MORGAN.  Three  hundred  thousand  dollars  apiece? 

Mr.  HUNTINGTON.  No;  1  think  that  two  or  three  of  them  are  worth 
$300,000  apiece,  and  some  of  them  are  not  worth  more  than  half  that. 

Senator  MORGAN.  Out  of  what  funds  were  those  vessels  paid  for  by 
the  company? 

Mr.  HUNTINGTON.  1  think  we  issued  some  bonds  for  a  part  of  them. 

Senator  MORGAN.  You  have  taken  those  bonds  up? 

Mr.  HUNTINGTON.  No;  I  think  not. 

Senator  MORGAN.  How  many  of  these  bonds  have  you  outstanding? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  About  how  many? 

Mr.  HUNTINGTON.  I  should  think  about  $2,500,000  in  bonds. 

Senator  MORGAN.  That  covers  pretty  well  the  whole  cost  of  the  ships, 
does  it  not? 

Mr.  HUNTINGTON.  No;  not  of  the  whole  20  ships.  It  would  be 
$6,000,000  or  $7,000,000. 

Senator  MORGAN.  Are  the  running  and  other  expenses,  and  every- 
thing connected  with  these  ships,  credited  to  the  Kentucky  company? 

Mr.  HUNTINGTON.  Yes;  I  should  say  so. 

Senator  MORGAN.  Just  as  the  railroads  are? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  So  that  they  are,  practically,  an  extension  of  the 
railroads  by  sea? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Have  you  any  more  ships  besides  these  twenty 
that  you  speak  of  ? 

Mr.  HUNTINGTON.  Not  as  owning  them. 

Senator  MORGAN.  You  have  got  some  others  leased? 

Mr.  HUNTINGTON.  We  have  an  arrangement  for  ships  between  New 
Orleans  and  Europe.  We  have  certain  arrangements  for  transporta- 
tion. 

Senator  MORGAN.  This  Kentucky  company  has  business  arrange- 
ments for  the  freight  of  ships  to  Europe? 

Mr.  HUNTINGTON.  Only  for  a  portion  of  the  year — during  the  cotton 
season. 

Senator  MORGAN.  Is  that  a  profitable  arrangement? 

Mr.  HUNTINGTON.  Freights  are  so  low  now  that  we  do  not  make 
much. 

Senator  MORGAN.  So  that,  under  the  powers  of  the  Kentucky  legis- 
lature, this  railroad  company  from  New  Orleans  to  Portland  has  twenty 
ships  to  New  York  and  some  ships  under  contract  to  Europe? 

Mr.  HUNTINGTON.  Mr.  Hutchinson  made  the  contracts.  I  do  not 
think  that  I  ever  saw  the  contracts.  He  said  he  had  made  an  arrange- 
ment which  he  thought  would  facilitate  matters. 

Senator  MORGAN.  You  have  through  arrangements  for  freight  from 
San  Francisco  to  Europe  over  this  line? 

Mr.  HUNTINGTON.  Not  to  any  considerable  extent. 

Senator  MORGAN.  Have  you  got  through  arrangements  for  freight 
between  New  York  and  New  Orleans  on  these  lines  aud  all  the  way 
through  to  the  West  ? 

Mr.  HUNTINGTON.  Yes;  we  do  a  good  deal  of  business  between  the 
Gulf  States  and  Texas  in  the  way  of  taking  cotton  to  Japan. 

Senator  MORGAN.  So  that  steamers  on  the  line  starting  at  New 
Orleans  bring  you  in  competition  with  all  the  overland  lines  running  to 
the  ocean  ? 

Mr.  HUNTINGTON.  Yes;  the  overland  Hues  would  not  amount  to  much 
in  competition, 


142  GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  That  is  your  competition  1 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  If  you  could  extend  that  line  of  railroad  from  San 
Francisco  to  Ogden,  it  would  be  a  very  important  feature,  would  it  not, 
to  that  great  line  of  transcontinental  American  and  foreign  trade  ? 

Mr.  HUNTINGTON.  That  is  a  very  good  business  of  the  road  now.  It 
has  been,  and  I  presume  will  continue  to  be. 

Senator  MORGAN.  You  would  like  to  have  a  contribution  of  the 
traffic  from  Ogden  to  San  Francisco,  and  to  throw  into  this  line  the 
immense  traffic  to  New  York  and  across  the  Atlantic  Ocean  ? 

Mr.  HUNTINGTON.  We  do  not  do  business  in  that  way.  I  do  not  think 
it  would  pay. 

Senator  MORGAN.  If  it  pays  you  to  put  these  other  lines  in  connection 
with  the  Southern  Pacific,  why  would  it  not  pay  you  to  put  the  Central 
Pacific  in  connection  with  it? 

Mr.  HUNTINGTON.  The  Central  Pacific  starts  1,500  miles  from  Chicago, 
which  is  a  great  city.  That  is  about  the  central  point  of  the  eastern 
traffic.  From  Ogden  to  San  Francisco,  call  it  900  miles.  From  San 
Francisco  to  New  Orleans  is  2,518  miles,  and  from  New  Orleans  to 
Chicago  is  some  1,200  miles ;  so  that  would  be  some  4,600  miles  against 
1,500  miles.  Our  coal  costs  us  three  times  as  much  as  the  coal  on  the 
roads  between  Ogden  and  New  York ;  so  that  it  would  be  rather  forcing 
things  to  send  freight  that  way. 

Senator  MORGAN.  Then  you  think  that  it  would  be  rather  a  detri- 
ment to  you  than  an  advantage  to  have  the  Central  Pacific? 

Mr.  HUNTINGTON.  I  do  not  see  how  it  would  be  a  detriment.  The 
Central  Pacific  has  business  of  its  own. 

Senator  MORGAN.  Would  it  not  be  an  advantage  to  the  Southern 
Pacific  to  have  it? 

Mr.  HUNTINGTON.  I  do  not  think  it  would. 

Senator  MORGAN.  It  would  be  neither  a  detriment  nor  an  advantage. 
It  would  be  a  dead  center.  What  is  the  inclination  in  your  mind  as  to 
having  the  Central  Pacific  line  connected  with  this  big  sweep  of 
enterprise? 

Mr.  HUNTINGTON.  I  never  have  thought  of  it  in  that  connection. 
But  as  a  property  in  itself,  it  is  a  good  property. 

Senator  MORGAN.  I  want  to  know  whether  it  would  be  a  detriment 
or  a  benefit  to  your  line  to  have  the  Central  Pacific  connected  with  it. 

Mr.  HUNTINGTON.  If  the  Central  Pacific  was  not  there 

Senator  MORGAN.  But  it  is  there,  and  likely  to  remain  there.  Would 
the  connection  of  the  Central  Pacific  with  your  great  enterprise  have  a 
tendency  to  be  injurious  to  that  other  line  or  contributory  to  it  in  the 
way  of  advantage? 

Mr.  HUNTINGTON.  I  think  it  would  be  rather  beneficial  to  have  it 
there. 

Senator  MORGAN.  Very  beneficial? 

Mr.  HUNTINGTON.  Beneficial,  so  far  as  that. 

Senator  MORGAN.  Your  company  without  the  Central  Pacific  is  a 
very  rich  and  powerful  company,  is  it  not?  I  mean  this  Kentucky 
company. 

Mr.  HUNTINGTON.  It  is  a  very  good  company;  but  as  to  its  being  a 
rich  and  powerful  railroad  company,  it  is  not.  West  of  the  hundredth 
meridian  we  have  more  than  half  the  acreage  of  the  country  arid  not 
over  4,000,000  of  population,  while  east  of  it  there  are  667000;000  of 
population. 


GOVERNMENT   DEBT   OF   THE   PACIFIC    RAILROADS.  143 

Senator  MORGAN.  If  you  wait  for  it  to  grow  up  you  would  be  likely 
to  have  100,000,000  of  people  west  of  one  hundredth  meridian? 

Mr.  HUNTINGTON.  I  would  like  to  see  those  figures. 

Senator  MORGAN.  Your  company  has  first-class  credit1? 

Mr.  HUNTINGTON.  Yes  ;  our  credit  has  always  been  very  good. 

Senator  MORGAN.  You  can  command  a  hundred  millions  in  the  market 
at  any  time  you  want  to  ? 

Mr.  HUNTINGTON.  I  should  hate  to  try  that  and  fail.  I  never  did 
fail,  and  I  should  hate  to  try  to  raise  a  hundred  millions. 

Senator  MORGAN.  You  could  command  fifty  millions'? 

Mr.  HUNTINGTON.  No;  nobody  could  command  fifty  millions  in  any 
railroad  organization  in  the  world.  I  believe  I  could  command,  on  my 
personal  credit,  as  much  as  anyone. 

Senator  MORGAN.  Is  there  any  other  railroad  company  which  has  as 
valuable  assets  as  you  have  and  is  entitled  to  the  same  sort  of  credit 
as  you  can  get? 

Mr.  HUNTINGTON.  You  can  not  build  up  the  credit  of  a  railroad  with 
the  sort  of  mileage  that  we  have  got  (so  much  of  the  road  running 
through  sagebrush)  to  the  same  extent  as  you  can  with  railroads  at 
the  North. 

Senator  MORGAN.  Is  there  any  other  railroad  company  (especially 
any  company  in  the  transcontinental  trade)  which  has  a  credit  better 
than  your  organization? 

Mr.  HUNTINGTON.  Well,  I  believe  that  anything  which  we  want  to 
do  capitalists  would  have  faith  that  we  would  do ;  but  there  is  the  great 
Pennsylvania  Central  and  the  great  New  York  Central.  I  should  not 
suppose  that  you  could  put  another  terminal  in  New  York  such  as  the 
New  York  Central  has  there  for  $100,000,000. 

Senator  MORGAN.  If  the  United  States  Government  is  ever  forced 
to  the  disagreeable  humiliation  of  being  compelled  to  sell  the  Central 
Pacific,  or  the  Union  Pacific,  or  both,  do  you  not  think  you  would  be  a 
pretty  fair  competitor  in  bidding  in  the  market  for  them? 

Mr.  HUNTINGTON.  There  would  be  a  place  in  the  bidding  where 
would  stop. 

Senator  MORGAN.  Where  would  that  be? 

Mr.  HUNTINGTON.  I  could  not  tell  you  now. 

Senator  MORGAN.  But  there  would  be  a  place  where  you  would  stop? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  You  would  be  certain  to  be  in  the  fight,  would 
you  not? 

Mr.  HUNTINGTON.  Yes;  but  I  should  stop. 

Senator  MORGAN.  You  could  not  stop  without  going  on  first. 

Mr.  HUNTINGTON.  I  probably  would  go  on  as  far  as  anyone,  but 
nobody  could  buy  either  of  these  properties,  in  my  opinion,  and  pay  a 
big  price  for  them.  Still,  they  are  a  going  property,  and  if  they  were 
properly  handled,  and  close  economy  observed,  and  care  taken  in  their 
operation,  the  Central  Pacific  could  pay  all  its  debt  to  the  Government. 
We  would  have  to  work  pretty  hard;  but,  with  an  extension  of  about 
fifty  years,  the  road  could  pay  2  per  cent  currently  on  the  Government 
debt. 

Senator  MORGAN.  In  my  six  years  of  experience  on  this  committee 
I  have  not  been  so  fortunate  as  to  hear  anyone  suggesting  that  these 
roads  could  ever  be  sold  for  their  actual  value,  or  that  they  could  even 
be  sold  for  the  money  which  would  replace  them.  I  conclude,  therefore, 
that  whenever  they  are  sold  they  will  be  sold  at  a  low  figure,  and  I 


144  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

have  concluded,  in  the  next  place,  that,  whatever  they  are  bought  for, 
they  would  have  to  be  bought  by  men  who  would  have  the  ability  to 
control  a  very  large  amount  of  money.  And  I  have  concluded,  in  the 
third  place,  that  when  they  are  sold  and  bought  they  will  fall  into  the 
hands  oi  some  great  railroad  corporation  of  the  country;  and  in  that 
view  of  the  case  I  have  thought  of  you  as  a  competitor,  in  the  full 
expectation  that  if  there  had  to  be  a  sale  of  these  roads  you  would 
come  in  and  buy. 

Mr.  HUNTINGTON.  C.  P.  Hunting-ton  will  make  a  dreadful  effort  to 
take  care  of  himself,  and  would  like  very  much  to  pay  100  cents  on  the 
dollar  to  the  Government.  That  would  give  him  more  satisfaction  than 
any  work  he  has  ever  done,  and  he  would  also  like  to  pay  as  much  as 
could  be  taken  out  of  this  road  to  pay  the  interest  on  the  Government 
debt.  I  should  go  right  to  work  to  see  what  I  could  do.  I  know  the 
country  west  of  the  Wahsatch  Mountains  better  than  any  other  man. 

Senator  MORGAN.  Do  you  think  that  you  could  sit  still  with  all  this 
power  in  your  hands  and  see  your  pet  railroad  sold  at  a  sacrifice  with- 
out making  a  bid  for  it? 

Mr.  HUNTINGTON.  No ;  I  should  make  a  bid  for  it.  But  if  the  United 
States,  after  all  that  I  have  done  for  this  road,  should  now  sell  it  out 
and  give  me  no  consideration  at  all,  I  should  say  that  I  could  not 
help  it. 

Senator  MORGAN.  Would  you  not  be  willing  in  some  sense  to  recoup 
what  you  did  for  the  Government  by  what  the  Government  has  done 
for  you  ? 

Mr.  HUNTINGTON.  The  Government  has  done  nothing  for  me ;  I  have 
done  more  for  the  Government  than  the  Government  has  done  for  me. 
I  am  an  American  citizen  and  am  proud  of  the  country.  We  built  this 
railroad  in  seven  years — three  years  less  than  the  time  allowed — and 
within  those  three  years  the  Government  saved  more  money  in  trans- 
portation and  in  policing  that  country  than  the  whole  cost  of  the  road 
to  the  Government.  The  building  of  the  Central  Pacific  road  is  the 
best  thing  and  the  cleanest  thing  which  has  ever  been  done  in  this 
country. 

Senator  MORGAN.  You  did  pretty  well  for  yourself  in  this  matter. 

Mr.  HUNTINGTON.  It  is  well  enough  to  talk  in  that  way.  When  I 
went  into  the  railroad  business  I  was  a  rich  man,  and  I  have  been  poor 
ever  since.  If  a  man  wanted  to  borrow  $100,000  from  me  before  I  went 
into  the  railroads,  I  could  let  him  have  it;  but  since  then  I  have  been  a 
borrower  all  the  time.  I  started  into  the  Central  Pacific  with  honesty 
of  purpose. 

Senator  MORGAN.  I  am  not  questioning  your  honesty  of  purpose. 

Mr.  HUNTINGTON.*  I  went  to  New  York  and  to  Boston  and  went 
among  my  old  friends  and  asked  them  to  invest  money  in  this  enter- 
prise, and  they  said,  "Hunting-ton,  we  do  not  want  to  go  into  it,  but  if 
you  guarantee  the  interest  on  these  bonds  for  ten  years  we  will  take 
them."  I  said,  "I  will  guarantee  them,  because  if  the  Central  Pacific 
ever  stops  short  of  completion  C.  P.  Huntington  will  be  so  badly  broken 
that  they  never  will  spend  any  time  in  picking  him  up." 

Senator  MORGAN.  We  have  got  all  these  statements  about  the 
absorption  of  roads  into  the  Kentucky  company,  and  about  the  debts 
being  paid  on  everything  by  the  Central  Pacific  as  they  matured,  and 
that  there  has  been  a  general  comparative  prosperity  on  your  side  of 
the  continent  down  there.  Now  it  becomes  my  duty  to  question  you  pn 
some  other  points.  Certain  citizens  of  California  have  made  a  com- 
plaint an4  have  addressed  a  memorial  to  the  Congress  of  tbe  United 


GOVERNMENT   DEBT   OF   THE   PACIFIC    RAILROADS.  145 

States  in  reference  to  the  Central  Pacific  and  the  Southern  Pacific,  in 
which  they  make  certain  statements.  I  want  to  lay  these  statements 
before  you  one  by  one  and  see  whether  or  not  you  admit  them  or  whether 
you  deny  them.  They  are  not  my  statements.  I  know  nothing  about 
them.  I  happen  to  be  from  a  section  of  the  country  which  is  entirely 
impartial,  and  which  is  rather  more  inclined  to  lean  to  you  than  to  any- 
body else,  because  you  did  help  New  Orleans.  These  statements  come 
from  a  committee  appointed  by  the  Anti-Funding  and  Foreclosure  Con- 
vention held  at  the  Metropolitan  Temple  in  San  Francisco,  January  18, 
1896.  I  will  give  you  a  chance  to  say  whether  they  are  true  or  not;  and 
I  am  glad  that  you  have  an  opportunity  of  making  your  statement  on 
oath.  It  was  for  that  purpose  that  I  insisted  upon  witnesses  being 
sworn  before  this  committee. 

I  will  not  bother  you  now  with  the  preamble  in  which  they  refer  to 
the  embarrassment  which  they  are  under  because  of  the  management 
of  the  roads,  nor  will  I  discuss  the  fact  that  they  insist  that  the  situa- 
tion in  connection  with  these  roads  is  one  (owing  to  its  involvements 
and  entanglement  and  to  the  great  number  of  collateral  roads  that 
are  included  in  the  situation);  that  can  not  be  solved  and  finally 
adjusted  in  any  other  way  than  through  judicial  action.  They  insist 
on  that  as  one  of  the  points.  They  say  it  can  not  be  done  by  a  contract 
of  sale,  and  that  it  can  not  be  done  in  any  other  way  than  through 
judicial  action,  and  therefore  they  oppose  any  proceeding  except  a  pro- 
ceeding in  foreclosure  of  the  mortgage  at  the  instance  of  the  United 
States  Government.  They  are  in  favor  of  a  foreclosure  of  the  mort- 
gage and  against  any  contract  and  sale,  and  for  those  reasons  generally 
stated,  they  say,  as  to  the  facts  of  the  case  that  it  is  not  true  that  the 
Central  Pacific  is  an  honest  debtor  or  that  it  is  entitled  to  favorable 
treatment  at  the  hands  of  the  Congress.  They  say,  "the  facts  are  that 
in  1861  the  Central  Pacific  Eailroad  Company  was  incorporated  under 
the  laws  of  California.  The  constitution  of  California  prescribed  then, 
as  now,  that  every  stockholder  of  a  corporation  or  joint  stock  associa- 
tion shall  be  individually  and  personally  liable  for  his  proportion  of  its 
debts  and  liabilities."  Are  you  aware  that  this  is  a  part  of  the  consti- 
tution of  California1? 

Mr.  HUNTINGTON.  I  am  not  learned  in  law.  The  question,  I  believe, 
is  in  the  courts.  My  own  impression  is  that  we  are  not  responsible. 
If  we  are,  we  are;  that  is  all.  But  I  have  no  idea  that  we  are. 

Senator  MORGAN.  They  say  that  that  question  was  decided  by  the 
supreme  court  of  California  in  the  case  of  French  v.  Teschemacher, 
the  interpretation  being  as  follows :  "  It  is  unconstitutional  for  the  legis- 
lature to  relieve  a  stockholder  of  a  corporation  of  his  individual  liabil- 
ities." They  then  insist  that  as  every  stockholder  of  the  Central  Pacific 
Eailroad  Company,  under  the  constitution  of  the  State  of  California,  is 
bonded  for  his  proportionate  share  of  all  the  debts  and  liabilities  of 
the  corporation,  no  act  of  Congress  can  now  be  passed  which  will 
legally  relieve  him  from  such  responsibility.  So  they  object  to  our 
attempting  to  heal  up  this  controversy  by  making  a  new  arrangement. 

Mr.  HUNTINGTON.  That  is  the  opinion  of  Adolph  Sutro.  I  do  not 
know  that  it  should  have  considerable  weight. 

Senator  MORGAN.  There  are  other  gentlemen  here  besides  Adolph 
Sutro.  There  is  M.  M.  Estee. 

Mr.  HUNTINGTON.  Has  he  signed  it? 

Senator  MORGAN.  Yes. 

Mr.  HUNTINGTON.  And  he  and  Sutro  are  together?    These  men 

Senator  MORGAN.  I  do  not  want  to  get  on  your  private  quarrels.    The 


146  GOVERNMENT   DEBT    OF   THE   PACIFIC    RAILROADS. 

memorial  is  signed  by  M.  M.  Estee,  Henry  E.  Highton,  A.  Caminetti, 
Adolph  Sutro,  J.  L.  Davie,  E.  M.  Gibson,  and  Marion  Cannon. 

Mr.  HUNTINGTON.  I  know  them  all.    They  all  have  a  grievance. 

Senator  MORGAN.  At  the  same  time,  the  memorialists  have  stated 
facts.  They  say:  "The  admitted  facts  show  that,  practically,  four  men 
living  in  Sacramento,  in  the  State  of  California,  namely,  C.  P.  Hunt- 
ing ton,  Mark  Hopkins,  Charles  Crocker,  and  Leland  Stanford,  incor- 
porated the  Central  Pacific  Railroad  Company  and  essayed  to  build  its 
road.  None  of  these  men  were  capitalists." 

Mr.  HUNTINGTON.  We  four  men  had  to  do  with  the  building  of  the 
road. 

Senator  MORGAN.  They  say  that  you  had  the  company  incorporated 
in  order  to  build  the  road. 

Mr.  HUNTINGTON.  I  did  myself  most  of  the  work  of  getting  the 
organization  up. 

Senator  MORGAN.  They  say,  "IsTone  of  these  men  were  capitalists." 
Were  any  of  you  capitalists  at  that  time? 

Mr.  HUNTINGTON.  I  do  not  know  what  constitutes  a  capitalist. 

Senator  MORGAN.  About  what  was  the  value  of  the  estate  of  each  of 
these  gentlemen  at  that  time? 

Mr.  HUNTINGTON.  Mr.  Hopkins  was  worth  several  hundred  thousand 
dollars.  The  Stanford  brothers  were  worth,  I  guess,  several  millions. 

Senator  MORGAN.  Is  it  a  guess  ? 

Mr.  HUNTINGTON.  I  never  saw  a  catalogue  of  what  they  were  worth ; 
but  they  were  rich  men ;  how  rich,  I  do  not  know.  Mr.  Crocker  was  a 
thrifty  merchant  there. 

Senator  MORGAN.  The  memorialists  state  here,  "The  assessed  valua- 
tion of  all  their  property  did  not  reach  $250,000." 

Mr.  HUNTINGTON.  We  were  men  who  were  largely  in  trade,  and  in  a 
good  way.  I  do  not  know  what  the  assessed  valuation  of  our  property 
was. 

Senator  MORGAN  (reading).  "The  people  of  California,  although 
few  in  number,  are  generous  to  a  fault.  And  the  most  munificent 
grants  and  donations  ever  made  by  a  government  or  a  people  to  a  pri- 
vate citizen  or  corporation  were  at  that  time  made  to  the  Central  Pacific 
Railroad  Company.  The  following  is  a  statement  of  some  of  the  prin- 
cipal grants  and  donations  of  land  and  money  made.  Congress  granted 
to  this  corporation  every  other  section  of  land  for  20  miles  on  each  side 
of  its  contemplated  road  for  the  whole  length  thereof,  and  also  on  the 
Oregon  branch  of  that  system,  amounting  in  the  aggregate  to  10,000,000 
acres,  of  the  value  of  fully  $12,500,000."  Did  Congress  make  a  dona- 
tion of  that  value? 

Mr.  HUNTINGTON.  I  do  not  know  what  the  value  was.  The  land  is 
not  sold,  excepting  as  it  is  mortgaged.  I  do  not  think  we  have  sold 
over  one-fourth  of  it;  but  we  have  sold  the  best  of  it. 

Senator  MORGAN.  Was  there  as  much  as  10,000,000  acres  of  laud 
granted  ? 

Mr.  HUNTINGTON.  I  should  think  that  in  the  two  grants  there  were. 

Senator  MORGAN  (reading).  "It  is  reported  that  they  have  already 
obtained  about  that  amount  in  sales  of  those  lands." 

Mr.  HUNTINGTON.  We  have  never  obtained  anything  like  that;  per- 
haps two-thirds  of  it. 

Senator  MORGAN  (reading).  "  The  Government  fixed  the  value  of  its 
own  adjoining  land  at  $2.50  an  acre."  Has  the  Government  held  on 
to  that  price  ? 

Mr.  HUNTINGTON.  Yes;  that  is  now  the  Government's  price  for  the 
adjoining  land. 


GOVERNMENT    DEBT   OF    THE    PACIFIC    RAILROADS.  147 

Senator  MORGAN  (reading).  "At  the  same  time  the  Government 
issued  to  that  company  its  mortgage  bonds  in  the  sum  of  $27,000,000 
(in  round  numbers),  which  now  amount,  principal  and  interest,  to  at 
least  $58,000,000," 

Mr.  HUNTINGTON.  That  is  about  correct.  We  had  Government 
bonds  to  the  amount  of  twenty-seven  millions  and  something;  and,  as 
I  stated  the  other  day,  they  were  sold  and  we  bought  gold  for  them.  A 
good  many  of  these  bonds  did  not  net  us  $40  on  the  hundred. 

Senator  MORGAN  (reading).  "In  addition  thereto  the  State  of  Cali- 
fornia guaranteed  the  interest  on  $1,500,000  of  the  bonds  of  the  com- 
pany, and  also  granted  to  it  30  acres  of  land  in  the  city  of  San  Fran- 
cisco of  great  value,  which,  with  aliother  undivided  interest  of  30 
acres  more,  is  now  mortgaged  for  $12,283,000." 

Mr.  HUNTINGTON.  I  do  not  think  there  is  anything  in  that.  This 
laud  was  in  Mission  Bay,  in  30  feet  of  water;  and  the  filling  it  up  cost 
as  much  as  the  laud  is  worth  now.  It  was  very  expensive  filling. 

Senator  MORGAN  (reading).  "  The  several  counties  of  the  State  con- 
tributed to  the  company  in  money  and  property  $1,500,000." 

Mr.  HUNTINGTON.  We  got  $300,000  from  Placer  County  and  $400,000 
from  the  city  of  Sacramento,  which  we  have  paid  back. 

The  CHAIRMAN.  These  counties  loaned  their  credit  to  the  company? 

Mr.  HUNTINGTON.  They  gave  us  some  bonds,  which  we  sold,  and 
afterwards  paid  for. 

Senator  MORGAN.  Did  you  do  that  with  all  the  counties  ? 

Mr.  HUNTINGTON.  There  were  no  counties  except  Placer  and  Sacra- 
mento. The  city  of  San  Francisco  gave  us  $400,000. 

Senator  MORGAN.  That  makes  one  million  and  a  half? 

Mr.  HUNTINGTON.  No;  it  makes  eleven  hundred  thousand. 

Senator  MORGAN  (reading).  "The  city  of  Sacramento  deeded  to  it  its 
river  front  of  the  estimated  value  of  $1,000,000." 

Mr.  HUNTINGTON.  It  was  of  no  practical  value;  it  never  was. 

Senator  MORGAN.  The  city  made  a  deed  of  it  to  the  company? 

Mr.  HUNTINGTON.  We  acquired  an  easement  there,  which  any  rail- 
road company  could  get.  We  did  not  get  the  fee  of  the  property. 

Senator  MORGAN.  Are  you  using  that  easement  now? 

Mr.  HUNTINGTON.  No;  I  do  not  think  so. 

Senator  MORGAN.  They  say  that  it  was  of  the  estimated  value  of 
$1,000,000? 

Mr.  HUNTINGTON.  Oh,  no;  it  is  not  so  because  these  fellows  say  so. 
There  was  no  particular  value  to  it.  It  was  an  easement  which  any 
railroad  company  could  get,  and  we  used  it  for  two  years,  and  then  we 
came  in  with  our  line  of  road  above  that.  It  was  of  no  particular  value; 
of  no  money  value. 

The  CHAIRMAN.  This  30  acres  given  by  the  city  of  San  Francisco  was 
land  lying  in  the  bay? 

Mr.  HUNTINGTON.  Yes;  in  Mission  Bay,  30  feet  deep. 

The  CHAIRMAN.  You  say  that  it  cost  you  as  much  to  fill  it  up  as  the 
land  is  worth  now  ? 

Mr.  HUNTINGTON.  More  than  it  is  worth  now.  Nobody  would  have 
taken  it  and  tilled  it  up  then. 

The  CHAIRMAN.  What  is  it  worth  now? 

Mr.  HUNTINGTON.  It  may  be  worth  $1,000,000. 

The  CHAIRMAN.  What  about  the  half  interest  in  the  30  acres  more? 

Mr.  HUNTINGTON.  The  Southern  Pacific  has  30  acres  and  the  Central 
Pacific  has  3(j 

Senator  MORGAN.  In  the  start  the  Southern  Pacific  and  the  Central 
Pacific  were  owned  by  the  same  parties? 


148  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  When  that  land  was  granted  we  had  nothing  to  do 
with  the  Southern  Pacific.  That  road  was  made  by  other  men  entirely. 
There  was  nobody  in  the  Southern  Pacific  who  was  in  the  Central 
Pacific. 

Senator  MORGAN.    When  you  bought  it? 

Mr.  HUNTINGTON.  When  we  bought  it — along  in  the  seventies,  some- 
time. 

Senator  MORGAN.  You  say  you  had  nothing  to  do  with  building  the 
Southern  Pacific? 

Mr.  HUNTINGTON.  They  had  built  it  to  Gilroy,  and  then  we  bought  it. 

Senator  MORGAN.  Who  bought  it? 

Mr.  HUNTINGTON.  I  did  the  dickering,  and  paid  for  it  partly  in 
money  and  partly  in  credit. 

Senator  MORGAN.  Who  were  the  men  that  bought  it? 

Mr.  HUNTINGTON.  Stanford,  Crocker,  Hopkins,  and  myself. 

Senator  MORGAN.  Nobody  else? 

Mr.  HUNTINGTON.  My  impression  is  nobody  else. 

Senator  MORGAN.  Then  you  bought  the  Southern  Pacific  road  of 
California? 

Mr.  HUNTINGTON.  We  bought  the  Southern  Pacific  road  from  San 
Francisco  to  Gilroy. 

Senator  MORGAN.  So  that,  approximately,  this  statement  is  correct? 

Mr.  HUNTINGTON.  This  30  acres  of  land  is.  I  do  not  know  where 
they  get  the  other. 

Senator  MORGAN.  They  say  that  you  have  got  more  than  10  miles  of 
the  water  front  of  the  bay  of  San  Francisco,  forming  the  entire  harbor 
of  Oakland  and  parts  of  the  harbors  of  Alameda,  Berkeley,  and  San 
Francisco,  which  is  of  the  estimated  value  of  not  less  than  $10,000,000. 

Mr.  HUNTINGTON.  Well,  the  Central  Pacific  never  had  anything  to 
do  with  it,  except  that  the  Central  Pacific  had  certain  grounds  which 
it  needed  for  depot  purposes.  The  Central  Pacific  had  nothing  to  do 
with  the  Oakland  water  front. 

Senator  MORGAN.  Did  anybody  obtain  the  entire  harbor  of  Oakland 
and  parts  of  the  harbors  of  Alameda,  Berkeley,  and  San  Francisco? 
Has  anybody  got  that  water  front? 

Mr.  HUNTINGTON.  We  own  shares  in  the  Oakland  Water  Front  Com- 
pany. I  own  some  myself.  The  Southern  Pacific  or  the  Central  Pacific 
does  not  own  any  of  it  that  I  know. 

Senator  MORGAN.  Does  it  cover  10  miles  of  water  front? 

Mr.  HUNTINGTON.  I  do  not  think  it  covers  half  of  it. 

Senator  MORGAN.  Does  it  cover  10  miles  of  the  water  front  of  the 
bay  of  San  Francisco,  forming  the  entire  harbor  of  Oakland  and  parts 
of  the  harbors  of  Alameda,  Berkeley,  and  San  Francisco? 

Mr.  HUNTINGTON.  I  think  the  Oakland  Water  Front  Company  owns 
3  or  4  miles. 

Senator  MORGAN.  And  you  own  stock  in  that  company! 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Who  else  owns  stock  in  it? 

Mr.  HUNTINGTON.  There  is  quite  a  great  number  of  shareholders. 

Senator  MORGAN.  Wrho  holds  the  majority  of  that  stock? 

Mr.  HUNTINGTON.  Lloyd  and  Levis. 

Senator  MORGAN.  Who  owns  the  majority  of  that  stock  now? 

Mr.  HUNTINGTON.  I  should  think  these  four  men  own  a  majority  of 
the  stock.  They  never  got  any  money  out  of  it,  and  it  is  not  worth  any 
$10,000,000. 

Senator  MORGAN  (reading).  "It  also  obtained  from  Wells,  Fargo  & 


GOVERNMENT   DEBT    OF    THE   PACIFIC    KAILROADS.  149 

Co.  $1,500,000  of  their  stock  in  consideration  of  favorable  transportation 
facilities  accorded  to  said  company."  Is  that  a  fact? 

Mr*  HUNTINGTON.  I  do  not  tliiuk  it  was  that  much.  I  think  it  was 
$1,300,000. 

Senator  MORGAN  (reading).  "The  foregoing  grants  reached  the  enor- 
mous amount  in  value  of  $57,000.000,  which  is  much  more  than  the 
entire  cost  of  the  road."  Can  you  state  what  was  the  entire  cost  of  the 
Central  Pacific  road? 

Mr.  HUNTINGTON.  No;  but  it  cost  more  than  that — very  much  more. 

Senator  MORGAN.  More  than  $57,000,000? 

Mr.  HUNTINGTON.  Very  much  more. 

Senator  MORGAN.  Have  you  ever  known  what  it  cost? 

Mr.  HUNTINGTON.  Oh,  yes,  yes.  First  we  started  with  some  con- 
tractors from  Sacramento  to  Newcastle,  31  miles. 

Senator  MORGAN.  Who  were  they? 

Mr.  HUNTINGTON.  One  was  C.  D.  Smith,  and  Hubbard.  These  are 
the  only  two  names  I  remember.  I  had  no  interest  in  those  contracts 
whatever. 

Senator  MORGAN.  Had  you  any  interest  in  any  contract  to  build  the 
Central  Pacific  road  ? 

Mr.  HUNTINGTON.  No;  I  had  no  interest  in  the  contracts.  I  had 
some  little  interest  in  the  Contract  and  Finance  Company.  After  the 
first  contractors  failed  to  do  the  work  Charles  Crocker  took  the  contract 
and  went  on  and  started  to  build  the  road.  I  do  not  know  who  was 
with  him  early.  He  thought  that  he  could  do  it,  but  by  and  by  he 
found  that  he  could  not.  I  tried  to  get  some  rich  men  in  New  York 
and  Boston  to  go  in  with  him  ;  but  they  said  no ;  they  could  not  go  into 
an  open  copartnership  with  unlimited  liabilities.  Then  the  Contract 
and  Finance  Company  was  organized.  When  that  was  organized  I 
tried  to  get  men  in  New  York  and  Boston  to  go  into  it ;  but  they  all 
said  that  the  risks  were  too  great  and  the  profits  too  remote.  There 
never  was  work  done  so  closely  as  that.  We  had  hard  work  to  get  the 
money  to  pay  for  it,  selling  Government  bonds  for  currency  and  taking 
the  currency  and  buying  gold. 

Senator  MORGAN.  You  have  mentioned  Mr.  Crocker  as  one  of  the 
gentlemen  who  had  an  interest  in  the  contract  for  the  construction  of 
the  Central  Pacific  road.  Had  you  any  interest  in  it  ? 

Mr.  HUNTINGTON.  I  had  none  except  in  the  Contract  and  Finance 
Company. 

Senator  MORGAN.  Had  Mr.  Stanford  any  interest  in  the  Contract 
and  Finance  Company? 

Mr.  HUNTINGTON.  I  think  so;  I  am  quite  sure  he  had. 

Senator  MORGAN.  Had  Mr.  Hopkins  any  interest  in  the  Contract  and 
Finance  Company? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  So  they  all  had  an  interest  in  the  contracts  of  the 
Contract  and  Finance  Company  except  yourself? 

Mr.  HUNTINGTON.  I  do  not  understand;  not  in  contracts. 

Senator  MORGAN.  You  had  no  interest  and  they  had  no  interest  in 
actual  contracts? 

Mr.  HUNTINGTON.  No;  T  am  sure  they  had  not. 

Senator  MORGAN.  Only  through  the  Contract  and  Finance  Company  ? 

Mr.  HUNTINGTON.  Only  through  the  Contract  and  Finance  Company. 

Senator  MORGAN.  They  say  here  that  you  got  donations  also  on  the 
Central  Pacific  line  for  town  sites,  depot  purposes,  and  other  kinds  of 
property. 


150  GOVERNMENT   DEBT   OF    THE   PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  No  doubt  we  got  considerable  for  depot  purposes. 
Everybody  wanted  us  to  go  into  a  particular  place,  and  everybody  was 
anxious  for  the  road  to  go  through  his  farm. 

Senator  MORGAN.  They  say  here  that  "soon  after  the  construction  of 
the  Central  Pacific  Railroad  Company,  C.  P.  Huntington  and  his  three 
associates  incorporated  another  company  under  the  name  of  the  l  Con- 
tract and  Finance  Company,'  and  the  same  men  were  the  owners  of, 
and  represented,  both  the  Central  Pacific  Eailroad  Company  and  the 
Contract  and  Finance  Company."  Is  that  true? 

Mr.  HUNTINGTON.  Yes;  it  is  true  that  we  organized  it,  but  I  was  in 
New  York  at  the  time. 

Senator  MORGAN.  Is  that  statement  true? 

Mr.  HUNTINGTON.  I  was  not  there  at  the  time;  I  do  not  think  I  had 
anything  to  do  with  it  at  the  start.  I  think  I  had  something  to  do  with 
it  later.  I  did  not  have  anything  to  do  with  the  organizing. 

Senator  MORGAN.  Did  the  same  men  comprise  the  two  companies? 

Mr.  HUNTINGTON.  Mr.  Crocker  was  in  it. 

Senator  MORGAN.  And  Hopkins? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  Stanford? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you? 

Mr.  HUNTINGTON.  I  do  not  think  I  had  anything  to  do  with  it  at  the 
start. 

Senator  MORGAN.  But  you  had  stock  in  it? 

Mr.  HuNTiNGTOn.  I  had  stock  in  it  later. 

Senator  MORGAN.  How  much  stock  had  you? 

Mr.  HUNTINGTON.  I  do  not  know  how  much. 

Senator  MORGAN.  In  proportion  to  the  whole  amount  of  capital  stock, 
how  much  had  you  ? 

Mr.  HUNTINGTON.  I  do  not  know;  Mr.  Hopkins  was  a  partner  of 
mine,  and  I  always  looked  to  him  to  see  after  our  interests. 

Senator  MORGAN  (reading).  "The  directors  of  the  Central  Pacific 
Railroad  Company  contracted  with  themselves  to  complete  the  road  of 
that  company  under  the  name  of  the  Contract  and  Finance  Company." 

Mr.  HUNTINGTON.  They  did  not  contract  with  themselves.  They 
may  have  contracted  with  the  Contract  and  Finance  Company,  but  not 
with  themselves. 

Senator  MORGAN.  That  depended  on  the  fact  of  there  being  the  same 
membership  in  the  two  companies? 

Mr.  HUNTINGTON.  I  do  not  know  how  they  were  intermingled. 

Senator  MORGAN.  Were  not  the  two  organizations  composed  of  the 
same  membership? 

Mr.  HUNTINGTON.  I  think  that  the  same  men  were  in  the  Central 
Pacific  and  in  the  Contract  and  Finance  Company.  I  never  saw  the 
books  of  the  Contract  and  Finance  Company. 

Senator  MORGAN.  You  are  not  prepared  to  deny  this  statement? 

Mr.  HUNTINGTON.  I  deny  it  on  the  general  assumption  that  these 
men  never  told  any  truth  that  I  ever  heard  of. 

Senator  MOIMAN.  That  may  do  for  you,  but  not  for  the  committee. 
The  committee  does  not  know  them. 

Mr.  HUNTINGION.  But  I  do. 

Senator  MORGAN.  I  am  very  thankful  that  I  do  not. 

Mr.  HUNTINGTON.  I  think  you  need  be. 

Senator  MORGAN.  Do  you  know  M.  M.  Estee,  one  of  these  men? 

Mr.  HUNTINGTON.  I  know  him,  unfortunately. 


GOVERNMENT   DEBT    OF    THE   PACIFIC    RAILROADS.  151 


Senator  MORGAN.  Then  I  do  not  understand  you  to  deny  this  state- 
ment made  by  these  very  credible  and  reliable  gentlemen! 

Mr.  HUNTINGTON.  I  do  not  know  anything  about  it;  I  never  saw  the 
books  of  the  Contract  and  Finance  Company. 

Senator  MORGAN.  Do  you  not  know,  just  as  well  as  if  you  had  read 
every  line  in  every  book  of  the  company,  that  you  owned  stock  in  this 
Contract  and  Finance  Company1? 

Mr.  HUNTINGTON.  I  am  very  sure  I  did. 

Senator  MORGAN.  How  much? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Did  not  you  and  Crocker  and  Stanford  and  Hop- 
kins own  the  whole  of  it? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Name  any  man  who  owned  any  stock  in  this  com- 
pany except  you  four. 

Mr.  HUNTINGTON.  I  will  not  say  that  even  Mr.  Stanford  owned 
any. 

Senator  MORGAN.  You  have  said  so. 

Mr.  HUNTINGTON.  No;  I  said  I  believed  he  did.  I  do  believe  he  did, 
although  I  never  saw  the  books. 

Senator  MORGAN.  These  men  state  facts,  and  if  the  facts  damage 
you 

Mr.  HUNTINGTON.  It  would  be  very  damaging  if  they  could  dam- 
age me. 

Senator  MORGAN.  You  have  the  opportunity  to  state  now,  on  oath, 
whether  they  have  stated  these  facts  correctly  or  not.  That  is  all  you 
should  dasire;  but  I  do  not  understand  that  you  do.  They  say  further 
here,  "They  charged  their  own  prices  for  the  work,  and  when  finished 
they  held  most  of  its  assets  and  someone  else  owned  most  of  its  debts. 
Under  these  conditions  it  is  apparent  that  the  asserted  cost  of  the  road 
was  about  three  times  as  much  as  its  actual  cost." 

Mr.  HUNTINGTON.  Do  they  say  that  anybody  owned  any  debts  which 
they  did  not  get  paid  ? 

Senator  MORGAN.  No,  sir. 

Mr.  HUNTINGTON.  That  is  important,  I  should  think. 

Senator  MORGAN.  I  am  merely  putting  to  you  what  they  say;  I  am 
not  arguing  this  statement  or  making  it;  I  am  putting  it  to  you  just  as 
they  make  it,  and  you  have  the  opportunity  of  answering  it  just  as  you 
desire.  (Eepeating.)  "They  charged  their  own  prices  for  the  work,  and 
when  finished  they  held  most  of  its  assets  and  someone  else  owned 
most  of  its  debts." 

Mr.  HUNTINGTON.  There  was  no  doubt  that  when  the  road  was  com- 
pleted there  were  large  debts,  but  they  were  paid. 

Senator  MORGAN.  Did  you  own  any  of  these  debts  f 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Who  did? 

Mr.  HUNTINGTON.  I  can  not  tell  now.  We  owed  Speyer  &  Co.  largely. 
That  was  a  banking  house  in  New  York  and  Europe.  We  owed  a  great 
many  debts  in  New  York,  but  they  were  all  paid  in  time,  as  soon  as  we 
got  the  money. 

Senator  MORGAN.  Were  these  debts  contracted  in  your  service  &>* 
your  benefit,  by  those  contractors  under  you? 

Mr.  HUNTINGTON.  I  got  money  for  the  Contract  and  Finance  Com- 
pany and  sent  it  out  to  them. 

Senator  MORGAN.  Is  it  true  that  "the  directors  of  the  Central  Pa- 
cific Eailroad  Company  contracted  with  themselves  to  complete  the 


152  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

road  of  that  company,  and  that  they  charged  their  own  prices  for  the 
work?" 

Mr.  HUNTINGDON.  The  prices  were  not  unreasonable,  because  I  do 
not  believe  there  was  another  set  of  men  in  the  country  who  would 
have  taken  the  contract  to  build  that  road,  which  Stanford  and  Crocker 
and  the  other  men  did,  and  they  would  not  have  taken  it,  only  that  I 
told  them  I  would  get  some  of  the  rich  men  of  New  York  and  Boston 
to  go  into  it  with  them.  I  think  I  must  have  spent  a  hundred  evenings 
in  arguing  the  matter  with  rich  men  in  New  York  and  Boston,  but 
they  all  gave  the  same  answer. 

Senator  MORGAN.  Was  it  to  get  the  money  to  work  out  your  con- 
tract that  you  talked  with  them? 

Mr.  HUNTINGTON.  It  was  to  build  the  road. 

Senator  MORGAN,  Was  it  to  get  the  money  to  work  out  your  contract? 

Mr.  HUNTINGTON.  It  was  to  build  the  road. 

Senator  MORGAN.  That  will  not  do. 

Mr.  HUNTINGTON.  I  had  no  contract  to  build  the  road. 

Senator  MORGAN.  You  did  not  undertake  to  build  the  road  or  any 
part  of  it  ? 

Mr.  HUNTINGTON.  I  started  in,  and  in  that  way  we  built  the  road. 

Senator  MORGAN.  I  am  talking  about  the  obligation  to  build  it. 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  agreed  to 
build  the  road,  I  have  no  doubt. 

Senator  MORGAN.  Did  you  agree  to  build  the  entire  road? 

Mr.  HUNTINGTON.  Yes;  to  build  the  entire  road. 

Senator  MORGAN.  That  was  what  theContract  and  Finance  Company 
agreed  with  the  Central  Pacific — to  build  the  entire  road  ? 

Mr.  HUNTINGTON.  Yes ;  until  we  met  the  Union  Pacific  road. 

Senator  MORGAN.  This  Contract  and  Finance  Company  had  a  con- 
tract with  the  Central  Pacific  to  build  this  road  clear  through  until  it 
met  the  road  of  the  Union  Pacific? 

Mr.  HUNTINGTON.  I  think  so ;  I  never  saw  the  contract,  but  I  am  sat- 
isfied there  was  such  a  contract. 

Senator  MORGAN.  And  the  road  was  built  under  that  contract? 

Mr.  HUNTINGTON.  Yes,  as  I  understand  it. 

Senator  MORGAN.  The  prices  at  which  the  road  was  built  were  fixed 
by  whom  ? 

Mr.  HUNTINGTON.  I  presume  by  the  directors  of  the  Cental  Pacific. 

Senator  MORGAN.  Were  they  not  the  same  men  as  constituted  the 
Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  Mr.  Crocker  was  not  a  director  of  the  Central 
Pacific;  Mr.  Stanford  and  Mr.  Hopkins  were. 

Senator  MORGAN.  So  that  the  same  men  who  owned  the  Central 
Pacific  contracted  with  the  Contract  and  Finance  Company,  which  they 
also  controlled,  and  fixed  the  prices  at  which  the  road  was  to  be  built? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  The  memorialists  say  here  that  "the  bonded 
indebtedness  which  the  United  States  assumed  and  agreed  to  pay  is 
but  a  small  part  of  the  actual  nominal  indebtedness  of  the  corporation. 
According  to  Poor's  Manual  for  1895  the  total  liabilities  of  the  Central 
Pacific  Eailroad  Company  reached  the  vast  sum  of  $202,491,584,  while 
under  the  estimates  made  by  the  United  States  Eailroad  Commission 
in  1888  the  total  cost  of  building  and  equipping  the  Central  and  West- 
ern Pacific  railroads  did  not  exceed  $40,000,000." 

Mr.  HUNTINGTON.  Anybody  who  understands  the  case  can  know  that 
the  road  was  not  built  for  any  such  money.  The  share  capital  of  a  rail- 


GOVERNMENT   DEBT   OF   THE   PACIFIC    RAILROADS.  153 

road  is  always  the  gambling  element  in  building  railroads  in  this  country. 
I  think  that  three-fourths  of  the  roads  in  this  country  have  been  built 
because  there  was  a  speculative  element  in  the  shares,  and  I  think  that 
the  speculative  element  in  railroads  has  broken  more  men  in  this  coun- 
try than  anything  else. 

Senator  MORGAN.  Aside  from  the  indebtedness  to  the  United  States, 
and  aside  from  the  first  mortgage  bonds  of  the  company,  what  was  the 
indebtedness  of  the  Central  Pacific  at  the  time  it  made  the  junction 
with  the  Union  Pacific? 

Mr.  HUNTINGTON.  There  were  $60,000,000  of  shares  in  face  value 
and  $27,000,000  in  bonds. 

Senator  MORGAN.  I  am  excluding  that.  How  much  did  the  company 
owe  at  the  time  of  its  junction  with  the  Union  Pacific,  aside  from  its 
debt  to  the  United  States  and  aside  from  the  first  mortgage  ? 

Mr.  HUNTINGTON.  It  had  out  600,000  shares  of  stock;  that  was  all. 

Senator  MORGAN.  How  much  money  did  that  represent? 

Mr.  HUNTINGTON.  It  represented  $60,000,000, 1  think. 

Senator  MORGAN.  Were  these  shares  sold  at  par? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  What  were  ti^y  sold  at? 

Mr.  HUNTINGTON.  At  all  sorts  of  prices.  The  shares  of  the  Union 
Pacific  changed  hands  at  from  5  to  8  per  cent,  and  the  shares  of  the 
Central  Pacific  exchanged  hands  at  about  the  same.  We  bought  quite 
a  lot  of  them  at  12£  per  cent. 

Senator  MORGAN.  What  were  they  worth  at  the  time  they  were 
issued  ? 

Mr.  HUNTINGTON.  I  do  not  believe  they  could  have  been  sold  in  New 
York  for  5  cents  on  the  dollar. 

Senator  MORGAN.  Did  you  issue  them  to  the  Contract  and  Finance 
Company  or  did  you  issue  them  for  money? 

Mr.  HUNTINGTON.  We  issued  them  because  we  thought  they  would 
have  some  value. 

Senator  MORGAN.  Did  you  sell  them  for  fun  or  for  money? 

Mr.  HUNTINGTON.  For  money. 

Senator  MORGAN.  What  did  you  get  for  them? 

Mr.  HUNTINGTON.  For  some  we  got  19  per  cent,  and  some  went  as 
high  as  85  per  cent. 

Senator  MORGAN.  Money  actually  paid  in? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  buy  any  of  them  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  You  never  bought  a  share  of  the  Central  Pacific 
stock? 

Mr.  HUNTINGTON.  No;  I  think  not. 

Senator  MORGAN.  Did  Crocker  buy  any  of  them! 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Did  Stanford? 

Mr.  HUNTINGTON.  No;  I  think  not 

Senator  MORGAN.  Did  Hopkins? 

Mr.  HUNTINGTON.  I  think  not. 

Senator  MORGAN.  None  of  these  four  gentlemen  bought  any  shares 
of  stock  in  the  Central  Pacific? 

Mr.  HUNTINGTON.  No;  I  think  not. 

Senator  MORGAN.  They  got  them  into  the  hands  of  other  people! 

Mr.  HUNTINGTON.  Yes. 


154  GOVERNMENT   DEBT   OF    THE    PACIFIC   RAILROADS. 

Senator  MORGAN.  How  much  money  did  they  get  for  the  shares  sold 
to  other  persons? 

Mr.  HUNTINGTON.  I  do  not  know;  probably  $30,000,000. 

Senator  MORGAN.  You  and  Crocker  and  Stanford  and  Hopkins  took 
shares  in  the  Contract  and  Finance  Company! 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  took  so  many 
shares  and  so  many  bonds,  and  built  the  road.  That  is  the  usual  way. 
They  took  payment  in  shares  and  bonds. 

Senator  MORGAN.  In  what  bonds? 

Mr.  HUNTINGTON.  In  the  Government  bonds  and  in  the  first-mort- 
gage bonds. 

Senator  MORGAN.  How  many  bonds  did  the  Contract  and  Finance 
Company  take? 

Mr.  HUNTINGTON.  I  think  it  took  them  all. 

Senator  MORGAN.  How  many  shares  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  Six  hundred  thousand  shares. 

Senator  MORGAN.  Which  you  gentlemen  took  ? 

Mr.  HUNTINGTON.  I  did  not  take  any  of  them.  The  Contract  and 
Finance  Company  took  them. 

Senator  MORGAN.  This  construction  company  took  all  of  the  bonds 
issued  and  indorsed  by  the  United  States,  and  all  of  the  first-mortgage 
bonds,  and  $60,000,000  of  stock  in  payment  upon  its  account  for  build- 
ing the  road? 

Mr.  HUNTINGTON.  Yes. 

The  CHAIRMAN.  In  other  words,  you  got  a  dollar  in  stock  for  every 
dollar  in  bonds  ? 

Mr,  HUNTINGTON.  The  company  took  so  much  for  doing  the  work. 

Senator  MORGAN.  Counting  the  bonds  at  par,  and  the  stock  at  par, 
how  much  money  would  that  represent  as  payment  made  to  you  by  the 
Central  Pacific  for  building  the  road? 

Mr.  HUNTINGTON.  That  is  easily  figured  out,  I  suppose.  But  the 
bonds  and  stock  were  not  figured  at  par,  we  sold  Government  bonds 
for  85,  and  we  bought  gold  at  over  2  to  1,  and  we  sold  our  own  bonds 
at  about  par  in  currency. 

Senator  MORGAN.  You  will  have  to  stay  here  a  long  time  before  you 
get  me  away  from  my  question.  Treating  the  Government  bonds  at 
par,  and  the  first-mortgage  bonds  at  par,  and  the  stock  at  par,  how 
many  dollars  would  they  all  amount  to? 

Mr.  HUNTINGTON.  One  hundred  and  sixteen  million  dollars. 

Senator  MORGAN.  What  was  the  cost,  in  your  account  rendered,  of 
the  building  of  this  railroad  from  end  to  end  ? 

Mr.  HUNTINGTON.  I  have  not  got  the  figures,  but  it  was  so  much 
that  we  could  not  begin  to  pay  our  debts  when  the  road  was  completed, 
and  we  had  to  carry  our  debts  on  private  credit.  It  was  several  years 
before  we  could  pay  the  debt. 

Senator  MORGAN.  Did  you  never  cast  a  balance  between  the  amount 
of  money  due  from  this  Contract  and  Finance  Company  and  the  amount 
of  bonds  and  stock  which  you  got? 

Mr.  HUNTINGTON.  I  question  if  I  ever  did. 

Senator  MORGAN.  Although  you  are  a  good  business  man  ? 

Mr.  HUNTINGTON.  I  am;  but  I  am  like  the  Dutchman  who  said  that 
he  never  kept  books,  but  that  he  knew  how  much  he  owed  and  how 
much  he  had  to  pay  it. 

Senator  MORGAN.  I  want  to  know  how  much  was  to  be  paid  to  the 
Contract  and  Finance  Company  and  how  much  you  got  for  it.  How 
much  did  the  work  cost!  * 


GOVERNMENT    DEBT   OF    THE    PACIFIC    RAILROADS.  155 

Mr.  HUNTINGTON.  I  can  not  say. 

Senator  MORGAN.  You  had  a  final  settlement,  I  suppose,  between 
the  Contract  and  Finance  Company  and  the  Central  Pacific  Company! 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  In  that  financial  settlement  what  was  the  amount 
of  your  account  for  building  that  road? 

Mr.  HUNTINGTON.  I  can  not  say.    I  was  not  in  California  at  the  time., 

Senator  MORGAN.  Do  you  state  now  before  this  committee  that  yoiu 
do  not  recollect? 

Mr.  HUNTINGTON.  I  do  not  recollect. 

Senator  MORGAN.  Can  you  come  within  a  million  dollars  of  it? 

Mr.  HUNTINGTON.  No;  it  is  over  twenty  years  ago. 

Senator  MORGAN.  Can  you  get  within  $5,000,000  of  it? 

Mr.  HUNTINGTON.  I  have  not  any  figures  in  my  head  now. 

Senator  MORGAN.  Do  you  wish  the  committee  to  adjouru  to  give 
you  a  chance  to  reflect  on  it? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  I  will  take  your  statement  within  $5,000,000. 
State  to  the  committee  within  $5,000,000  what  that  railroad  cost  under 
the  contract  with  the  Contract  and  Finance  Company. 

Mr.  HUNTINGTON.  It  must  have  cost,  as  I  put  things  together, 
somewhere  in  the  neighborhood  of  $80,000,000  or  $90,000,000  in  money. 

Senator  MORGAN.  So  that  these  men  are  not  more  than  $10,000,000 
wrong  in  their  statement? 

Mr.  HUNTINGTON.  They  say  $40,000,000,  I  believe.  I  am  only  sur- 
prised that  they  have  not  said  $10,000,000. 

Senator  MORGAN.  Are  the  books  of  the  Contract  and  Finance  Com- 
pany in  existence? 

Mr.  HUNTINGTON.  I  do  not  think  they  are. 

Senator  MORGAN.  What  became  of  them? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Were  they  not  destroyed? 

Mr.  HUNTINGTON.  I  do  not  think  I  ever  saw  the  books  e^T  the  (Tort* 
tract  and  Finance  Company. 

Senator  MORGAN.  Have  you  ever  made  any  inquiry  about  them?' 

Mr.  HUNTINGTON.  I  do  not  think  that  I  have. 

Senator  MORGAN.  Do  you  not  know  that  they  were  destroyed  ? 

Mr.  HUNTINGTON.  No;  I  do  not. 

Senator  MORGAN.  Do  you  not  believe  that  they  were? 

Mr.  HUNTINGTON.  I  believe  they  were. 

Senator  MORGAN.  By  whom? 

Mr.  HUNTINGTON.  I  do  not  know;  when  the  work  was  all  over  I  told 
Mark  Hopkins,  who  Lad  a  whole  room  full  of  books  and  papers  and 
stuff  in  the  building,  to  sell  them  for  old  paper  stock. 

Senator  MORGAN.  It  would  have  been  inconvenient  for  the  Contract 
a*id  Finance  Company  to  have  a  set  of  books  which  showed  them 
indebted  under  the  constitution  of  California. 

Mr.  HUNTINGTON.  I  never  thought  of  that. 

The  CHAIRMAN.  Was  that  provision  of  the  constitution  of  California 
in  operation  at  that  time? 

Mr.  HUNTINGTON.  I  do  not  know  exactly;  I  think  it  was. 

Senator  MORGAN  (reading  from  the  constitution  of  California).  "  Each 
stockholder  of  a  corporation,  or  joint  stock  association,  shall  be  indi- 
vidually and  personally  liable  for  his  proportion  of  its  debts  and  liabil- 
ities." That  is  in  the  thirty-sixth  section  of  the  fourth  article  of  the 
constitution  of  1849. 


156  GOVERNMENT   DEBT    OF    THE  PACIFIC   RAILROADS. 

Mr.  TWEED  (counsel  for  the  Central  Pacific).  You  are  aware,  Senator, 
that  in  the  Stanford  case  the  circuit  court  of  California  and  the  circuit 
court  of  appeals  have  both  held  that  there  was  no  stockholder's  liability 
under  the  laws  of  California  at  that  time.  The  case  has  been  argued 
before  the  Supreme  Court  of  the  United  States  last  month  and  has  not 
yet  been  decided ;  but  the  decisions  of  the  courts  up  to  the  present  time 
have  been  that  there  was  in  fact  no  stockholder's  liability  under  the  law 
of  California  existing  at  that  period. 

Senator  MORGAN  (to  Mr.  Huntington).  Suppose  that  those  who  were 
compromised  by  the  existence  of  those  books  put  them  out  of  the  way  ? 

Mr.  HUNTINGTON.  I  do  not  think  that  was  ever  thought  of. 

Senator  MORGAN.  But  the  books  are  gone? 
i  Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  And  destroyed? 

Mr.  HUNTINGTON.  I  do  not  think  I  ever  saw  the  books  of  the  Con- 
tract and  Finance  Company.  I  was  here  on  this  side  nearly  all  the 
time,  and  I  am  quite  sure  that  I  never  saw  them. 

Senator  MORGAN.  It  is  an  unusual  event,  is  it  not,  for  gentlemen 
who  are  engaged  in  contracts  and  enterprises  which  cover  accounts 
amounting  to  $100,000,000  or  more  to  want  to  preserve  the  records  of 
their  transactions  rather  than  to  destroy  them? 

Mr.  HUNTINGTON.  No;  I  think  not.  It  is  not  unusual  with  me  to 
destroy  anything  which  is  not  of  use.  I  want  to  get  these  things  out 
of  the  way. 

Senator  MORGAN.  You  can  see  how  much  trouble  it  would  have 
saved  us  if  these  books  had  been  preserved. 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  BRICE.  This  is  a  very  important  matter,  and  is  a  very  com- 
plicated and  difficult  matter,  but  it  is  a  separate  matter  from  that  which 
we  commenced  to  hold  this  investigation  about.  We  commenced  to 
hold  this  investigation  about  bills  for  the  settlement  of  the  debts  to  the 
Government  of  the  Central  Pacific  and  the  Union  Pacific.  The  liabili- 
ties of  the  stockholders  is  a  different  question,  and  must  be  met  by  a 
different  report,  and  I  suggest  to  the  chairman  that  he  should  separate 
these  two  inquiries.  In  one  of  them  I  am  interested  and  in  the  other 
I  am  not.  I  have  no  objection  in  the  world  if  Senator  Morgan  and  the 
citizens  of  California  can  make  Mr.  Huntington  and  others  pay  their 
share  of  the  indebtedness  of  the  company,  but  I  am  concerned  about 
the  terms  of  the  settlement  which  we  ought  to  make  with  each  of  these 
companies  in  the  pending  bills. 

Senator  MORGAN.  I  am  not  concerned  with  the  settlement  until  cer- 
tain facts  are  developed.  We  want  to  know  what  are  the  complications 
which  the  court  will  have  to  deal  with  before  the  settlement  is  made. 

The  CHAIRMAN.  Is  not  that  a  matter  for  the  courts  to  find  out? 

Senator  MORGAN.  Yes;  but  I  am  going  now,  as  a  member  of  the  Sen- 
ate, to  inform  my  conscience  and  judgment  as  to  whether  I  shall  vote 
for  a  contract  to  Mr.  Huntington,  or  whether  I  shall  vote  to  put  him  in. 
court. 

The  committee  here  adjourned  until  to-morrow  at  10.30  a.  m. 


WASHINGTON,  D.  C.,  February  18, 1896. 
The  committee  met  at  10.30  a.  m. 
Present :  Senators  Gear  (chairman),  Stewart,  Brice,  Frye,  and  Morgan, 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS.  157 

CENTRAL  PACIFIC. 
EXAMINATION  OF  MR.  C.  P.  HUNTINGTON— Kesumed. 

The  examination  of  Mr.  COLLIS  P.  HUNTINGTON,  president  of  the 
Southern  Pacific  Railway  Company,  was  resumed. 

Senator  MORGAN.  I  will  continue  where  I  left  off  yesterday,  Mr. 
Huntington,  in  the  examination  of  statements  made  at  a  public  meet- 
ing- in  San  Francisco,  to  which  I  called  your  attention  in  part  yester- 
day. They  say  that  Mr.  Huntington  and  his  associates,  at  different 
times,  organized  three  companies  with  which  to  carry  on  their  railroad 
business.  First,  the  Contract  and  Finance  Company ;  second,  the  West- 
ern Development  Company ;  and  third,  the  Pacific  Improvement  Com- 
pany. Did  you  organize  such  companies? 

Mr.  HUNTINGTON.  There  were  such  companies  organized. 

Senator  MORGAN.  For  the  purpose  of  enabling  you  to  carry  on  rail- 
way business  in  California? 

Mr.  HUNTINGTON.  Yes;  railway  and  other  business. 

Senator  MORGAN.  I  believe  you  said  that  the  books  of  the  Contract 
and  Finance  Company  had  disappeared  in  some  way  and  were  not  to 
be  found? 

Mr.  HUNTINGTON.  I  said  that  I  did  not  know  where  they  were,  and 
that  I  presumed  they  had  been  sold  for  old  paper  stock  or  burned  up. 
I  do  not  know  that. 

Senator  MORGAN.  How  much  do  you  know  about  it;  what  is  the 
extent  of  your  knowledge  on  that  subject? 

Mr.  HUNTINGTON.  I  never  saw  the  books  of  the  company  and  was 
never  in  the  office  of  the  Contract  and  Finance  Company.  But  from 
common  report,  which,  I  may  say,  was  gathered  from  the  atmosphere, 
perhaps,  I  have  come  to  the  conclusions  which  I  have  stated. 

Senator  MORGAN.  Have  you  relied  on  the  atrncophere  for  information 
as  to  a  fact  so  important  as  that? 

Mr.  HUNTINGTON.  It  was  not  so  very  important  after  the  company 
was  closed  up. 

Senator  MORGAN.  Whether  important  or  not,  have  you  relied  on  the 
atmosphere  for  your  information  about  it? 

Mr.  HUNTINGTON.  I  think  I  have  got  some  better  information  from 
the  atmosphere  and  from  common  report  sometimes  than  from  other 
sources. 

Senator  MORGAN.  In  this  particular  case  have  you  relied  on  common 
report  and  on  the  atmosphere  for  your  information  ? 

Mr.  HUNTINGTON.  I  never  saw  the  books  of  the  Contract  and  Finance 
Company,  and  therefore 

Senator  MORGAN.  Mr.  Huntiugton,  it  will  take  a  long  time  for  you 
to  dodge  this  question.  You  had  better  come  right  to  the  answer. 

Mr.  HUNTINGTON.  It  would  take  me  a  longer  time  to  tell  what  I  do 
not  know. 

Senator  MORGAN.  Do  you  know  now,  and  do  you  state  on  your  oath, 
that  you  rely  on  common  rumor  for  your  information? 

Mr.  HUNTINGTON.  I  do,  for  this  matter  as  to  the  Contract  and  Finance 
Company. 

Senator  MORGAN.  Have  you  not  been  informed  of  it  by  any  of  your 
associates  in  that  company? 

Mr.  HUNTINGTON.  I  never  was  told  that  their  books  were  destroyed^ 
or  were  burned  ujj>  or  were  sold. 


158  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Have  you  not  been  informed  of  their  being,  in  some 
way  or  other,  put  away  ? 

Mr,  HUNTINGTON.  No;  I  never  have  been. 

Senator  MORGAN.  Those  books  contained  transactions  to  the  extent 
of  many  million  dollars? 

Mr.  HUNTINGTON.  Yes;  they  must  have,  I  think. 

Senator  MORGAN.  They  contained  information  of  all  the  particulars 
and  details  of  those  transactions! 

Mr.  HUNTINGTON.  I  should  say  so. 

Senator  MORGAN.  They  included,  I  suppose,  the  contracts  between 
the  Contract  and  Finance  Company  and  the  railroad  company1? 

Mr.  HUNTINGTON.  I  should  say  so. 

Senator  MORGAN.  They  contained  statements  of  all  the  money  re- 
ceived from  the  Central  Pacific  for  the  construction  of  the  road? 

Mr.  HUNTINGTON.  I  suppose  so. 

Senator  MORGAN.  They  included  evidence  of  all  the  payments  made 
by  the  Central  Pacific  to  the  Contract  and  Finance  Company f 

Mr.  HUNTINGTON.  I  can  not  say  as  to  that,  but  no  doubt  they  did 
include  a  large  proportion  of  it. 

Senator  MORGAN.  Was  a  history  of  any  part  of  the  company's  trans- 
actions kept  anywhere  else  except  in  the  books  of  the  Contract  and 
Finance  Company? 

Mr.  HUNTINGTON.  A  major  part  of  them  would  have  been  kept  in 
those  books. 

Senator  MORGAN.  Would  they  be  kept  anywhere  else? 

Mr.  HUNTINGTON,  I  do  not  know. 

Senator  MORGAN.  Then  why  do  you  say  the  major  part  of  them  were? 

Mr.  HUNTINGTON.  Because  I  do  not  know  that  all  of  them  were. 

Senator  MORGAN.  You  profess  not  to  know  that  any  of  them  were? 

Mr.  HUNTINGTON.  I  know  from  common  report,  or,  as  I  say,  from  the 
atmosphere,  which(seems  to  be  a  more  comprehensive  term. 

Senator  MoRGAN^'You  stated  yesterday,  if  I  understood  you,  that 
you  advised  that  the  best  disposition  to  be  made  of  these  books  and 
papers  was  to  burn  them  up. 

Mr.  HUNTINGTON.  Yes;  I  told  Mr.  Hopkins  that. 

Senator  MORGAN.  Why? 

Mr.  HUNTINGTON.  Because  the  business  of  the  company  was  closed 
up. 

Senator  MORGAN.  Are  you  accustomed  to  burn  your  books  and  papers 
after  you  close  a  transaction? 

Mr.  HUNTINGTON.  Yes;  after  a  certain  time. 

Senator  MORGAN.  How  long  after? 

Mr.  HUNTINGTON.  General  book  accounts  are  kept  until  after  the 
law  of  limitation  expires. 

Senator  MORGAN.  As  soon  as  the  transaction  is  without  the  law  of 
limitation  you  burn  your  books  ? 

Mr.  HUNTINGTON.  Not  always. 

Senator  MORGAN.  There  are  some  exceptional  cases,  it  appears. 
What  exceptions  can  you  call  to  mind  at  this  moment? 

Mr.  HUNTINGTON.  I  do  not  know;  I  should  say  there  are  many. 

Senator  MORGAN.  State  what  general  transactions  you  have  had  in 
which  you  have  burned  your  books. 

Mr.  HUNTINGTON.  We  have  burned  very  few  in  our  mercantile 
accounts.  It  is  a  continuous  business,  from  decade  to  decade,  and  the 
accounts  are  very  old  before  we  burn  them.  But  when  a  company  is 
disincorporated  I  do  not  see  any  object  in  keeping  its  books. 


GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS.  159 

Senator  MORGAN.  To  what  person  did  you  give  the  advice  to  burn 
these  books  ? 

Mr.  HUNTINGTON.  To  Mark  Hopkins. 

Senator  MORGAN.  How  did  you  and  Mr.  Hopkins  happen  to  get  into 
conversation  on  that  subject? 

Mr.  HUNTINGTON.  As  I  remember,  there  was  a  room  in  the  building 
occupied  by  these  books  and  papers  of  the  Contract  and  Finance  Com- 
pany, and  I  said  to  Mr.  Hopkins,  uAs  the  company  is  disincorporated, 
why  not  clear  the  stun0  out?'7 

Senator  MORGAN.  Where  was  that  building? 

Mr.  HUNTINGTON.  No.  56  K  street,  Sacramento,  on  the  south  side 
of  K. 

Senator  MORGAN.  Did  you  burn  up  the  contents  of  any  other  room 
there? 

Mr.  HUNTINGTON.  I  do  not  think  there  was  any  other  room  with  a 
finished,  complete  business. 

Senator  MORGAN.  What  did  you  do  with  that  room  after  the  papers 
were  burned  up? 

Mr.  HUNTINGTON.  I  can  not  say.    It  was  put  into  use  immediately. 

Senator  MORGAN.  Did  you  have  any  great  use  for  house  room  in 
that  building? 

Mr.  HUNTINGTON.  I  am  quite  sure  that  all  the  rooms  were  occupied. 

Senator  MORGAJS.  Was  it  a  matter  of  great  importance  to  you  that 
you  should  have  the  use  of  that  particular  room? 

Mr.  HUNTINGTON.  Perhaps  the  rent  of  the  room  may  have  been 
important  as  one  item  of  expense,  for  I  always  watch  little  things. 

Senator  MORGAN.  Was  that  a  rented  house? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  I  suppose  you  could  have  rented  a  room  close  by? 

Mr.  HUNTINGTON.  If  there  had  been  any  reason  for  keeping  the 
papers  of  a  disincorporated  company,  I  suppose  the  company  could 
have  rented  another  room. 

Senator  MORGAN.  In  your  discussion  with  Mr.  Hopkins  about  the 
burning  up  of  these  papers  was  anything  said  about  the  constitution 
of  California,  and  about  the  possibility  of  the  liability  of  stockholders 
under  that  constitution  individually  for  the  debts  of  the  company? 

Mr.  HUNTINGTON.  No ;  I  am  pretty  sure  there  never  was.  The  fact 
is  that  these  are  matters  that  the  legal  department  of  the  company 
always  attends  to.  Anything  of  that  kind  I  do  not  have  anything  to 
do  with  myself.  It  is  passed  over  to  the  legal  department. 

Senator  MORGAN.  But  if  the  Government  of  the  United  States,  or 
any  other  creditors  of  the  Central  Pacific  or  of  the  Contract  and 
Finance  Company,  had  desired  to  enforce  an  obligation  against  the 
stockholders  of  either  of  these  respective  companies,  these  papers  would 
have  been  important  evidence,  would  they  not? 

Mr.  HUNTINGTON.  I  do  not  know  whether  they  would  or  not. 

Senator  MORGAN.  Their  absence  would  have  been  very  convenient 
for  you,  would  it  not? 

Mr.  HUNTINGTON.  That  I  do  not  know;  I  should  turn  that  matter 
over  to  the  legal  department. 

Senator  MORGAN.  Did  your  lawyer  advise  you  to  burn  those  books 
and  papers? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Then  you  did  not  turn  that  over  to  the  legal 
department? 

Mr.  HUNTINGTON.  No;  I  merely  said  to  Mr.  Hopkins  that  Z  would 
clear  out  the  room.  I  was  there  only  temporarily. 


160  GOVERNMENT    DEBT    OF    THE   PACIFIC    RAILROADS. 

Senator  MORGAN.  Those  books  and  papers  were  not  any  particular 
inconvenience  to  you,  were  they? 

Mr.  HUNTINGTON.  No;  not  to  me.     My  office  was  in  New  York. 

Senator  MORGAN.  So,  then,  you  advised  that  these  papers  be  de- 
stroyed ? 

Mr.  HUNTINGTON.  It  was  hardly  advice.  I  simply  said  to  Mr.  Hop- 
kins, "If  you  want  the  room,  why  not  clear  it  out?" 

Senator  MORGAN.  It  was  a  little  casual  remark? 

Mr.  HUNTINGTON.  Not  a  serious  thing. 

Senator  MORGAN.  But  it  became  serious  when  the  papers  were  burned. 

Mr.  HUNTINGTON.  I  do  not  know  that  they  were  burned. 

Senator  MORGAN.  I  should  like  to  have  those  papers  before  the  com- 
mittee. 

Mr.  HUNTINGTON.  I  should  like  very  much  to  furnish  them,  but  I  do 
not  know  how  to  get  them. 

Senator  MORGAN.  I  see  in  this  memorial  adopted  by  the  California 
Anti-Funding  Convention  that  they  state  that  they  represent 

Mr.  HUNTINGTON  (interrupting).  Excuse  me;  who  are  "they r I 

Senator  MORGAN.  They  state  that  they  represent  a  large  public  meeting. 

Mr.  HUNTINGTON.  Yes ;  it  was  a  meeting  of  52  persons.  They  called 
for  delegates  from  all  the  counties  of  the  State,  and  I  believe  there  were 
delegates  from  five  counties.  It  was  a  Sutro  meeting.  But  the  call  was 
very  loud  and  very  long  and  far  spread. 

Senator  MORGAN.  There  was  a  public  meeting  held  January  18, 1896, 
at  the  Metropolitan  Temple,  San  Francisco,  and  that  meeting  appointed 
James  H.  Barry,  Charles  C.  Terrill,  and  John  M.  Reynolds  a  committee 
on  the  funding  bill  to  prepare  an  address. 

Mr.  HUNTINGTON.  I  wonder  are  they  on  the  tax  list  of  San  Francisco. 

Senator  MORGAN.  They  may  not  be,  but  you  know  it  is  written  that 
the  poor  shall  inherit  the  kingdom  of  heaven. 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  And  I  expect  you  will  never  find  out. 

Mr.  HUNTINGTON.  We  will  see. 

Senator  MORGAN.  Yes,  we  will  see.  Do  you  know  these  gentlemen, 
or  either  of  them  ? 

Mr.  HUNTINGTON.  I  do  not  know  that  I  do.  Please  to  name  them 
again. 

Senator  MORGAN.  James  H.  Barry,  Charles  C.  Terrill,  and  John  M. 
Reynolds. 

Mr.  HUNTINGTON.  I  take  it  they  were  not  among  the  merchants  or 
bankers. 

Senator  MORGAN.  They  may  be  common  people. 

Mr.  HUNTINGTON.  I  do  not  mean  common  people. 

Senator  MORGAN.  They  say : 

On  Saturday  evening  last,  on  two  days'  notice,  during  one  of  the  heaviest  storms 
of  the  season,  a  public  meeting  was  held  at  Metropolitan  Temple  in  this  city 
(which  was  crammed  to  its  utmost  capacity  and  from  which  not  less  than  15,000 
people  were  turned  away)  to  protest,  among  other  things,  against  any  funding  of 
the  Pacific  Railroad  debt. 

The  strength  and  unanimity  of  sentiment,  the  earnest  determination  of  tie  audi- 
ence, which  represented  every  shade  of  politics,  even  the  press  could  not  adequately 
describe. 

No  counterpart  to  the  scene  has  ever  occurred  in  this  city  since  1861,  when,  at  the 
intersection  of  Market  and  Montgomery  streets,  23,000  men  resolved  to  maintain  the 
union  of  these  States  with  their  lives,  their  fortunes,  and  their  sacred  honor. 

At  that  meeting,  without  a  dissenting  voice,  the  following  resolutions  were 
adopted . 

Resolved,  By  the  people  of  San  Francisco,  in  mass  meeting  assembled,  that  we 
enter  our  solemn  protest  against  the  passage  of  any  funding  bill  whatever,  and 


GOVERNMENT   DEBT.  OF   THE   PACIFIC    RAILROADS.  161 

hereby  appeal  to  the  Speaker  of  the  House  to  protect  us  by  not  giving  a  special 
order  for  a  day  to  the  Pacific  Railroad  Committee;  and  further 

Resolved,  That  we  appeal  to  each  individual  member  of  the  House  of  Representa- 
tives not  to  overlook  the  200,000  protests  filed  against  the  bill  by  the  inhabitants  of 
the  Pacific  Coast. 

Have  you  been  entirely  unaware  of  that  meeting? 

Mr.  HUNTINGTON.  To  this  extent:  That  I  have  no  more  idea  that 
there  were  15,000  people  there  than  that  there  Avere  15,000,000  there. 

Senator  MORGAN.  It  was  a  very  large  meeting. 

Mr.  HUNTINGTON.  1  do  not  think  it  was.    I  heard  about  it. 

Senator  MORGAN.  Are  you  aware  that  this  memorial  came  from  the 
Pacific  Coast? 

Mr.  HUNTINGTON.  Have  you  the  envelope  that  it  came  in? 

Senator  MORGAN.  I  have  not. 

Mr.  HUNTINGTON.  I  think  there  was  printed  on  it  a  red  line  with  the 
words:  "Huntington  on  his  way  to  Washington  to  bribe  Congress." 
There  is  nothing  in  all  that  one-half  as  earnest  as  Adolph  Sutro  was 
when  he  told  me  that  if  I  did  not  build  a  road  to  his  place,  where  he 
had  a  drinking  saloon,  a  bath  house,  a  gambling  house,  and  rooms  up- 
stairs, and  build  it  at  once,  he  would  fight  me  in  Washington  and  fight 
me  everywhere  else.  That  was  in  earnest. 

Senator  MORGAN.  Now,  you  have  brought  Adolph  Sutro  into  the 
case,  and  you  will  not  hear  the  last  of  him  until  you  have  answered  all 
your  accusations  against  him.  I  have  not  brought  him  in. 

Mr,  HUNTINGTON.  He  signs  that  paper. 

Senator  MORGAN.  No;  he  does  not.  That  is  the  paper  issued  by  the 
first  meeting.  Here  is  the  paper  issued  by  the  second  meeting,  and  it 
is  signed  M.  M.  Estee,  Henry  E.  Heighten,  A.  Caminetti,  Adolph  Sutro, 
J.  L.  Davie,  E.  M.  Gibson,  and  Marion  Cannon. 

Mr.  HUNTINGTON.  As  uncanny  a  crowd  as  a  farmer  ever  found  by 
his  henroost  at  night.  All  these  charges  emanate  from  the  same  parties. 

Senator  MORGAN.  The  next  company  that  they  speak  of  your  organ- 
izing was  the  Western  Development  Company. 

Mr.  HUNTINGTON.  That  was  an  organized  company. 

Senator  MORGAN.  Who  organized  that  company? 

Mr.  HUNTINGTON.  I  should  think  David  Colton  and  Mr.  Crocker  and 
Mr.  Miller — I  should  think  largely — and  Mr.  Hopkins.  I  do  not  know 
exactly.  It  was  an  organized  company. 

Senator  MORGAN.  Were  you  in  it? 

Mr.  HUNTINGTON.  I  think  I  was. 

Senator  MORGAN.  Was  Mr.  Stanford  in  it? 

Mr.  HUNTINGTON.  I  think  he  was. 

Senator  MORGAN.  Then  you  omitted  two  of  the  most  important  names 
in  it.  Was  there  anybody  else  in  it? 

Mr.  HUNTINGTON.  I  do  not  think  there  was.  There  were  not  more 
than  five  or  six  or  seven. 

Senator  MORGAN.  Have  you  told  all  of  the  membership  of  that  com- 
pany so  far  as  you  recollect? 

Mr.  HUNTINGTON.  There  may  have  been  others. 

Senator  MORGAN.  You  said  that  Mr.  Miller  was  in  it. 

Mr.  HUNTINGTON.  I  think  that  D.  H.  Miller  was  in  it.  That  com- 
pany was  a  convenience  for  building  railroads  and  ships  and  many  other 
things.  Those  things  could  not  be  done  by  an  open  copartnership. 

Senator  MORGAN.  What  railroads  did  this  Western  Development 
Company  build? 

Mr.  HUNTINGTON.  I  think  it  built  the  San  Francisco  Northern.  I 
am  not  positive.  I  think  they  had  to  do  with  the  Monterey  road.  That 
p  R 11 


162  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS, 

was  a  road  commenced  by  others  and  not  completed ;  and  they  finished 
it  and  changed  it.  It  was  a  crooked  narrow-gauge  road,  and  they  made 
it  a  straight  and  standard  gauge  road. 

Senator  MORGAN.  Be  good  enough  to  point  out  those  roads  on  the 
map. 

[Mr.  Hun  tin  gton  pointed  out  on  the  map  the  two  roads  referred  to.] 

Senator  MORGAN.  How  far  does  that  road  run? 

Mr.  HUNTINGTON.  Something  like  200  miles. 

Senator  MORGAN.  What  is  its  northern  terminus? 

Mr.  HUNTINGTON.  Tehama. 

Senator  MORGAN.  That  is  not  part  of  the  Oregon  and  California  road, 
is  it? 

Mr.  HUNTINGTON.  No;  I  think  that  that  was  built  by  the  Pacific 
Improvement  Company.  They  commenced  to  build  this  road  from 
Portland  down,  and  they  failed,  and  they  let  us  complete  and  finish  it. 
We  only  built  up  to  Bedding,  and  there  we  stopped  for  some  time. 

Senator  MORGAN.  Is  this  road,  or  the  road  to  Monterey,  a  part  of 
the  Central  Pacific  system? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  It  belongs  to  the  Central  Pacific  ? 

Mr.  HUNTINGTON.  The  road  from  Bedding  to  Coles  belongs  to  the 
Central  Pacific? 

Senator  MORGAN.  How  about  the  Monterey  line? 

Mr.  HUNTINGTON.  That  belongs  to  the  Southern  Pacific. 

Senator  MORGAN.  Were  both  built  by  the  same  company? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  That  is  to  say,  by  the  Western  Development 
Company  f 

Mr.  HUNTINGTON.  No;  I  say  that  the  northern  one  was  built  by  the 
Pacific  Improvement  Company,  and  the  southern  one  by  the  Western 
Development  Company. 

Senator  MORGAN.  Then  they  are  both  the  property  now  of  the  Cen- 
tral Pacific  system? 

Mr.  HUNTINGTON.  No.  The  one  from  Bedding -to  Coles  belongs  to 
the  Central  Pacific,  and  the  one  from  Salina  to  Monterey  to  the  South- 
ern Pacific,  system. 

Senator  MORGAN.  They  say  in  this  memorial  that  the  books  can  not 
now  be  found  nor  the  history  of  the  company  traced. 

Mr.  HUNTINGTON.  Which  of  the  companies? 

Senator  MORGAN.  Of  the  Western  Development  Company. 

Mr.  HUNTINGTON.  I  do  not  know.  I  think  that  the  books  are  in 
California. 

Senator  MORGAN.  Where  are  they  kept? 

Mr.  HUNTINGTON.  In  San  Francisco,  I  should  say. 

Senator  MORGAN.  In  what  place  in  San  Francisco? 

Mr.  HUNTINGTON.  I  should  say  in  the  building  on  the  corner  of 
Market  and  Fourth  streets.  We  have  two  pretty  large  offices  in  San 
Francisco;  one  on  the  corner  of  Market  and  Fourth  and  one  on  the 
corner  of  Thompson  and  Fourth. 

Senator  MORGAN.  Are  there  many  books  and  papers  connected  with 
the  Western  Development  Company  ? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  They  did  a  good  deal  of  business,  did  they  not? 

Mr.  HUNTINGTON.  Yes;  they  did  considerable  business. 

Senator  MORGAN.  Their  transactions  are  all  outlawed,  are  they! 

Mr.  HUNTINGTON.  I  do  not  know.    1  should  think  so. 


GOVERNMENT   DEBT   OP    THE   PACIFIC    RAILROADS.  163 

Senator  MORGAN.  But  their  books  have  not  been  burned  nor  de- 
stroyed within  your  knowledge? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Are  they  in  the  way! 

Mr.  HUNTINGTON.  I  do  not  know.  We  may  have  more  room  now 
than  we  had  then. 

Senator  MORGAN.  You  did  not  discover  that  they  were  in  the  way 
when  you  were  burning  the  books  of  the  other  company  ? 

Mr.  HUNTINGTON.  They  did  not  exist  at  that  time.  Yes ;  I  guess  the 
Western  Development  Company  was  organized  then. 

Senator  MORGAN.  You  have  not  stated  to  the  committee  whether 
the  books  and  papers  of  that  company  are  in  existence  or  not. 

Mr.  HUNTINGTON.  I  am  not  positive. 

Senator  MORGAN.  Do  you  believe  that  they  are  accessible  to  this 
committee  if  we  wanted  to  send  for  them  ? 

Mr.  HUNTINGTON.  I  think  so;  I  do  not  know. 

Senator  MORGAN.  The  Pacific  Improvement  Company;  what  was 
that  instituted  to  do  ? 

Mr.  HUNTINGTON.  The  same  as  the  others. 

Senator  MORGAN.  Who  were  the  stockholders  in  it  I 

Mr.  HUNTINGTON.  Substantially  the  same. 

Senator  MORGAN.  Were  they  not  exactly  the  same! 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  What  diiference  was  there? 

Mr.  HUNTINGTON.  Mr.  Colton  was  not  in  that  company,  and  I  think 
Mr.  Hopkins  was  not.  I  do  not  know  whether  he  was  living  when  .that 
company  was  organized  or  not. 

Senator  MORGAN.  But,  except  those  gentlemen,  the  stockholders  in 
that  company  were  the  same  as  the  stockholders  in  the  Western  Devel- 
opment Company  and  in  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  Substantially,  I  should  say.  You  see  these  com- 
panies were  organized  for  the  purpose  of  building  railroads  and  ships 
and  various  things.  There  were  some  people  in  the  Contract  and 
Finance  Company — Mr.  E.  B.  Crocker  and  some  others,  I  think,  and  I 
think  one  of  the  Stanfords  other  than  Leland — and  they  died,  and  then 
the  company  was  closed  up.  It  is  an  easy  thing  to  organize  companies 
under  the  laws  of  California,  and  old  interests  were  dropped  out. 
Some  time,  Senator,  if  you  build  railroads  you  will  find  that  when  men 
drop  out  and  can  not  work  you  have  to  leave  them  out  and  organize 
another  company,  so  that  the  men  who  do  the  work  shall  have  what- 
ever benefit  comes  from  it. 

Senator  MORGAN.  Yes,  I  understood  that  a  freezing-out  process  was 
necessary  in  this  business. 

Mr.  HUNTINGTON.  I  never  heard  the  expression  used  in  that  way 
before.  When  a  man  gets  so  that  he  does  not  work  he  should  not  have 
pay,  either  living  or  dead. 

Senator  MORGAN.  Did  the  Contract  and  Finance  Company,  or  the 
Western  Development  Company,  or  the  Pacific  Improvement  Company 
build  any  railroads  that  are  not  connected  with  the  Central  Pacific? 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  built  the 
Central  Pacific.  I  think  the  whole  of  it  except  that  part  from  Eedding 
to  Coles  on  the  Oregon  and  California  line;  I  think  that  that  was  built 
by  the  Pacific  Improvement  Company.  I  am  pretty  sure  that  it  was. 

Senator  MORGAN.  Did  the  Contract  and  Finance  Company  build  any 
other  railroads  ? 

Mr.  HUNTINGTON.  Not  for  the  Central  Pacific. 


164  GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Did  it  build  any  railroads  except  for  the  Central 
Pacific! 

Mr.  HUNTINGTON.  I  have  mentioned  the  Monterey  branch.  The 
Pacific  Improvement  Company  built  most  of  the  roads  of  the  Southern 
Pacific — perhaps  not  most,  but  they  built  the  last  roads  that  were  built 
for  the  Southern  Pacific;  I  suppose  500  or  600  miles. 

Senator  MORGAN.  The  controlling  stockholders,  and  almost  all  the 
stockholders  of  these  three  companies,  were  the  same  parties,  were 
they  not? 

Mr.  HUNTINGTON.  Hardly  that,  Senator. 

Senator  MORGAN.  How  was  it? 

Mr.  HUNTINGTOH.  Mr.  Colton  went  out,  and  Mr.  E.  B.  Crocker  went 
out,  and  I  think  some  others.  They  died,  I  think. 

Senator  MORGAN.  The  controlling  men  in  each  of  those  corporations 
were  the  same,  were  they  not1? 

Mr.  HUNTINGTON.  Yes ;  they  were  the  same  set  that  built  all  these 
^oads. 

Senator  MORGAN.  And  they  furnished  the  capital? 

Mr.  HUNTINGTON.  Yes;  they  furnished  the  credit. 

Senator  MORGAN.  Their  credit  was  the  capital? 

Mr.  HUNTINGTON.  It  is  so  in  all  these  great  undertakings. 

Senator  MORGAN.  Were  these  roads  built  before  or  after  the  comple- 
tion of  the  Central  Pacific? 

Mr.  HUNTINGTON.  They  were  built  after  the  completion  of  the  Cen- 
tral Pacific,  I  think.  We  completed  the  Central  Pacific  in  1&69,  on  the 
10th  of  May,  as  I  recollect,  and  I  think  that  all  the  railroads  in  Cali- 
fornia that  we  have  constructed  were  built  after  that. 

Senator  MORGAN.  And  these  two  other  companies — the  Western 
Development  Company  and  the  Pacific  Improvement  Company — were 
organized  for  the  purpose  of  building  these  additional  roads? 

Mr.  HUNTINGTON.  They  were  organized  to  build  whatever  was 
wanted  to  be  built.  They  were  bright,  active  men,  and  the  building  of 
railroads  was  in  their  line,  and  they  were  the  only  men  there  to  do  it. 

Senator  MORGAN.  And  these  roads  were  built  by  men  who  at  that 
time  owned  the  Central  Pacific? 

Mr.  HUNTINGTON.  Yes;  substantially.  They  owned  the  shares  of 
the  Central  Pacific,  or  held  them  as  collateral.  The  Contract  and 
Finance  Company  built  the  road,  and  they  took  the  shares  and  sold 
them. 

Senator  MORGAN.  That  is  to  say,  the  Contract  and  Finance  Company 
having  built  the  Central  Pacific,  the  stock  of  the  Central  Pacific,  all  of 
it,  was  held  by  the  Contract  and  Finance  Company  as  collateral  to 
secure  the  debt  of  the  Central  Pacific  to  the  Contract  and  Finance 
Company  for  building  the  road? 

Mr.  HUNTINGTON.  Perhaps  that  would  not  be  just  the  proper  way  to 
state  it. 

Senator  MORGAN.  Well,  you  state  it  the  other  way. 

Mr.  HUNTINGTON.  As  I  said  yesterday,  I  think  that  the  Contract 
and  Finance  Company  took  the  bonds  and  stock  of  the  Centra1  Pacific 
and  agreed  to  build  the  road. 

Senator  MORGAN.  That  is  plain  enough. 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  did  not  take 
all  the  capital  stock  of  the  Central  Pacific,  which  was  $100,000,000. 

Senator  MORGAN.  How  much  of  the  stock  did  the  Contract  and 
Finance  Company  take? 

Mr.  HUNTINGTON.  Sixty  million  dollars. 


GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS.  165 

Senator  MORGAN.  After  they  had  built  the  road  they  held  this 
$60,000,000  of  stock  as  collateral? 

Mr.  HUNTINGTON.  I  do  not  think  they  held  it  as  collateral.  They 
were  the  owners  of  the  stock,  I  suppose.  There  was  such  a  contract 
made.  Mr.  Hopkins  was  living  at  that  time,  and  was  a  pretty  nice 
man,  and  I  trusted  all  these  things  to  him. 

Senator  MORGAN.  When  the  railroad  was  completed  the  stock  of  the 
Central  Pacific  was  paid  over  to  the  Contract  and  Finance  Company  in 
discharge  of  the  debt  of  the  Central  Pacific  to  the  Contract  and  Finance 
Company  for  building  the  road,  to  the  extent  of  $60,000,000? 

Mr.  HUNTINGTON.  It  was  not  paid  over  in  bulk,  I  suppose. 

Senator  MORGAN.  I  did  not  ask  about  its  being  paid  in  bulk.  I  want 
to  know  whether  it  was  paid  over. 

Mr.  HUNTINGTON.  The  whole  $60,000,000  did  not  go  to  the  Contract 
and  Finance  Company.  Mr.  Crocker  and  others  took  some  of  the 
shares. 

Senator  MORGAN.  How  much  was  paid  over  to  the  Contract  and 
Finance  Company  ? 

Mr.  HUNTINGTON.  I  do  not  know,  because  Mr.  Crocker  had  a  good 
deal  of  the  shares. 

Senator  MORGAN.  Was  $60,000,000  paid  over  in  stock  to  the  Contract 
and  Finance  Company  ? 

Mr.  HUNTINGTON.  Sixty  million  dollars  was  the  whole  amount  then 
issued. 

Senator  MORGAN.  The  balance  of  the  $100,000,000  of  stock  had  not 
been  issued  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  How  much  of  this  stock  was  paid  for  this  debt  of 
the  Central  Pacific  to  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  We  usually  made  contracts  in  building  roads  to 
take  so  much  of  bonds  and  stock  and  to  do  a  fair  amount  of  work. 

Senator  MORGAN.  I  am  not  asking  you  for  the  manner  of  dealing;  I 
am  asking  how  much  was  paid. 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  About  how  much  ? 

Mr.  HUNTINGTON.  I  do  not  know.  I  should  say  probably  half  of 
the  stock  of  the  Central  Pacific,  or  perhaps  two-thirds. 

Senator  MORGAN.  Or  perhaps  four-fifths? 

Mr.  HUNTINGTON.  I  should  think  not;  still,  there  may  have  been. 

Senator  MORGAN.  Then,  between  one-half  and  four-fifths  of  the 
$60,000,000  of  stock  of  the  Central  Pacific  was  paid  for  this  work? 

Mr.  HUNTINGTON.  I  should  guess  that  that  was  so. 

Senator  MORGAN.  How  much  was  paid  in  bonds  of  the  Central  Pacific 
Company? 

Mr.  HUNTINGTON.  I  think  the  Construction  and  Finance  Company 
took  all  of  the  bonds.  We  had  great  difficulty  in  getting  men  in  to 
help  us. 

Senator  MORGAN.  I  do  not  want  to  go  wandering  on  about  the  pri- 
vate history  of  this  company. 

Mr.  HUNTINGTON.  I  thought  you  did*  I  thought  that  that  was  what 
you  wanted. 

Senator  MORGAN.  I  want  to  know  how  much  of  the  bonds  01  the  Cen- 
tral Pacific  Company  (the  first  or  second  mortgage  bonds)  this  Contract 
and  Finance  Company  took  from  the  Central  Pacific  Company  in  pay- 
ment for  the  work  they  did  in  building  the  road? 

Mr.  HUNTINGTON.  For  building  the  whole  road  the  Central  Pacific 


166  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

paid  the  proceeds  of  its  bonds,  and  so  much  stock  to  different  parties, 
but  mostly  to  the  Contract  and  Finance  Company.  I  do  not  know  any 
better  way  of  stating  it  than  that.  I  did  not  count  the  shares. 

Senator  MORGAN.  Who  did  any  work  there  in  the  building  of  the 
Central  Pacific  road  except  the  Contract  and  Finance  Company? 

Mr.HuNTiNGTON.  There  were  seven  contractors  between  Sacramento 
and  Newcastle. 

Senator  MORGAN.  Were  any  of  these  bonds  paid  to  either  of  these 
seven  contractors  ? 

Mr.  HUNTINGTON.  I  think  there  were. 

Senator  MORGAN.  Have  you  no  recollection  of  it? 

Mr.  HUNTINGTON.  No;  I  was  not  there,  except  on  one  occasion. 

Senator  MORGAN.  I  do  not  care  whether  you  were  there.  Do  you 
know  whether  bonds  were  paid  to  them  or  not? 

Mr.  HUNTINGTON.  I  think  so;  I  am  quite  sure  of  it.  . 

Senator  MORGAN.  How  much  was  paid  to  any  or  all  of  them  in  these 
bonds? 

Mr.  HUNTINGTON.  I  do  not  know 5  we  had  great  difficulty  in  getting 
men  to  do  the  work. 

Senator  MORGAN.  Are  you  answering  the  que&tion,  or  are  you  excus- 
ing yourself  from  answering? 

Mr.  HUNTINGTON.  I  want  to  explain. 

Senator  MORGAN.  State  the  facts  first. 

Mr.  HUNTINGTON.  After  these  seven  men  had  finished  their  contracts 
we  had  serious  difficulties  on  account  of  the  labor.  We  let  the  contract 
to  Charles  Crocker  &  Co.  We  thought  that  they  could  do  it,  but  we  very 
soon  found  that  they  could  not.  I  hoped  to  get  some  one  to  go  in  with 
them  in  New  York  or  San  Francisco,  but  I  could  not  get  anyone  to  do 
so.  They  said  they  would  not  go  into  an  open  copartnership,  but  that 
if  our  people  got  up  a  construction  company  they  would  take  shares  in 
it.  We  were  all  tired  before  they  got  the  road  over  the  Sierra  Nevada 
Mountains.  We  tried  to  get  in  some  capitalists  in  New  York  and 
Boston,  but  they  all  gave  the  same  reply.  They  said,  "  Huntington, 
the  risk  is  too  great  and  the  profits,  if  any,  are  too  remote.  We  cau 
not  take  the  risk." 

Senator  MORGAN.  Let  me  see  if  I  understand  you.  You  got  the 
charter  for  the  Central  Pacific  and  then  you  got  authority  from  Con- 
gress to  issue  these  bonds,  and  you  got  the  guarantee  of  the  United 
States  for  how  many  millions? 

Mr.  HUNTINGTON.  $27,300,000. 

Senator  MORGAN.  These  bonds  being  the  assets  for  building  the 
Central  Pacific,  you  commenced  by  contracting  with  some  companies 
for  a  portion  of  the  road  in  California? 

Mr.  HUNTINGTON.  No;  I  am  not  sure  whether  we  got  the  other  roads 
then. 

Senator  MORGAN.  These  roads  were  not  built  under  the  act  of  Con- 
gress? 

Mr.  HUNTINGTON.  Yes.  They  met  us  here  in  Washington  and  they 
said  that  we  must  assign  that  iiart  of  the  road  between  Sacramento 
and  San  Francisco  to  them,  and'that  the  Central  Pacific  would  not  get 
the  charter  unless  we  did  assign  that  portion.  Everybody  in  California 
wanted  to  come  home  to  see  the  old  folks,  and  the  old  folks  wanted  to 
go  out  there. 

Senator  MORGAN.  I  do  not  want  to  listen  to  all  that. 

Mr.  HUNTINGTON.  I  want  to  give  the  details.  We  took  the  road 
after  they  had  got  the  other  road  well  along.  They  had  some  trouble 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROAD.  167 

in  building  it.  We  should  not  have  located  it  where  it  is  if  we  had 
had  the  locating  of  it. 

Senator  MORGAN.  I  want  to  see  if  I  understand  you.  I  understood 
you  to  say  that  before  the  Contract  and  Finance  Company  took  charge 
of  this  road  a  portion  of  the  railroad  that  is  now  the  Central  Pacific 
was  built. 

Mr.  HUNTINGTON.  That  is  right. 

Senator  MORGAN.  How  much  of  it? 

Mr.  HUNTING-TON.  I  do  not  know.  As  I  recollect,  they  were  away  up 
above  Cisco.  Mr.  Crocker  took  the  contract  to  go  to  Station  No.  137. 

Senator  Morgan  interrupted  Mr.  Huntington. 

Senator  FRYE.  Why  can  not  Mr.  Huntington  be  permitted  to  go  on 
and  give  his  answer? 

Senator  MORGAN.  Because  he  will  not  answer. 

Senator  FRYE.  I  see  no  reason  for  stopping  him. 

Senator  MORGAN.  I  do,  and  I  am  conducting  this  examination  accord- 
ing to  my  ideas  until  the  committee  overrules  me. 

Mr.  HUNTINGTON.  I  would  like  to  make  all  this  very  plain. 

Senator  MORGAN.  You  have  an  opportunity  to  make  it  entirely 
plain.  When  the  Contract  and  Finance  Company  took  the  contract  to 
complete  the  road  from  the  end  which  had  not  been  built  to  Ogden,  or 
to  a  junction  with  the  Union  Pacific,  were  there  any  contractors  on  that 
part  of  the  road  which  had  not  been  built? 

Mr.  HUNTINGTON.  Mr.  Crocker,  as  I  was  going  to  say,  took  the  con- 
tract from  Newcastle  to  section  137.  He  got  up  to  about  Cisco.  We 
were  laboring  pretty  hard 

Senator  MORGAN  (interrupting).  You  need  not  go  on  that  side  issue. 
I  want  the  facts. 

Mr.  HUNTINGTON.  I  am  giving  the  facts.  We  got  up  on  that  con- 
tract to  about  Cisco,  and  I  think  it  was  about  there  that  the  Contract 
and  Finance  Company  took  up  the  work.  That  is  92  miles  from  Sac- 
ramento. 

Senator  MORGAN.  How  far  between  that  and  Ogdeu? 

Mr.  HUNTTNGTON.  About  742  miles. 

Senator  MORGAN.  That  is  the  portion  of  the  road  covered  by  the 
Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  anybody  else  have  anything  to  do  with  it? 

Mr.  HUNTINGTON.  I  think  not. 

Senator  MORGAN.  For  building  that  portion  of  the  road  what  did 
the  Contract  and  Finance  Company  get? 

Mr.  HUNTINGTON.  I  do  not  know.  I  think  they  got  the  bonds  and 
some  few  shares. 

Senator  MORGAN.  You  got  all  of  the  bonds  of  the  company  for  this 
742  miles  of  road  ? 

Mr.  HUNTINGTON.  I  think  so,  but  not  all  of  the  $27,300,000.  The 
whole  line  from  San  Jose  to  Ogden  is,  I  think,  865  miles — that  123  miles 
and  742,  as  I  recollect. 

Senator  MORGAN.  You  had  not  then  built  any  of  those  " feeders?" 

Mr.  HUNTINGTON.  I  do  not  think  we  had  built  any  then. 

Senator  MORGAN.  After  they  got  the  whole  thing  completed  the  Con- 
tract and  Finance  Company  was  paid  up  for  its  contract? 

Mr.  HUNTINGTON.  I  do  not  think  we  did  pay  them  up  at  that  time. 
That  is,  we  did  not  sell  the  securities  for  some  years  after  that.  We 
sold  the  bonds.  I  do  not  think  I  saw  any  bonds  of  the  company  since 
six  months  after  tbe  road  was  completed. 


168  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROAD. 

Senator  MORGAN.  As  you  have  stated  it,  the  contract  between  the 
Central  Pacific  and  the  Contract  and  Finance  Company  was  that  the 
Contract  and  Finance  Company  was  to  receive  its  payment  in  bonds 
and  stock? 

Mr.  HUNTINGTON.  That  is  correct. 

Senator  MORGAN.  It  was  to  receive  no  money? 

Mr.  HUNTINGTON.  No.    I  think  there  was  no  money. 

Senator  MORGAN.  Then,  when  they  completed  their  work  they  got 
their  payment  in  bonds  and  stock  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  Yes;  they  got  it  in  the  usual  way.  The  engineer 
made  estimates  for  every  20  miles,  and  when  that  section  was  completed 
the  debt  was  paid. 

Senator  MORGAN.  The  debt  of  the  Central  Pacific  to  the  Contract 
and  Finance  Company  was  paid? 

Mr.  HUNTINGTON.  Yes.  I  think  the  Central  Pacific  issued  bonds, 
the  same  as  the  Government  did,  for  every  20  miles. 

Senator  MORGAN.  It  is  quite  an  easy  question  for  you  to  answer, 
whether  the  Central  Pacific  complied  with  its  contract  and  paid  you  for 
this  work  in  bonds  and  stock? 

Mr.  HUNTINGTON.  I  think  they  did.    I  said  so  before. 

Senator  MORGAN.  Then  after  that  you  organized  two  other  companies 
for  the  purpose  of  building  other  lines  in  California? 

Mr.  HUNTINGTON.  Yes;  they  came  in,  not  at  the  same  time,  but  each 
in  its  own  time. 

Senator  MORGAN.  After  these  transactions? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  You  organized  these  two  other  companies! 

Mr.  HUNTINGTON.  Yes ;  we  organized  three,  or  four,  or  five  companies. 

Senator  MORGAN.  I  want  to  know  how  many  railroads  or  parts  of 
railroads  (u feeders")  were  built  by  you  and  your  associates  to  connect 
with  the  Central  Pacific,  and  when  each  one  was  built,  and  what  was 
the  name  of  each? 

Mr.  HUJNTINGTON.  We  bought,  I  think,  a  dozen  roads  in  California. 
All  of  them  had  failed,  I  think,  when  we  bought  them  and  could  not 
meet  their  obligations. 

Senator  MORGAN.  Connected  with  the  Central  Pacific? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  I  have  not  asked  you  about  any  roads  bougnt  by 
you  that  were  not  connected  with  the  Central  Pacific. 

Mr.  HUNTINGTON.  I  do  not  know  of  any  except  those  which  we 
built.  They  were  the  Oregon  branch,  the  San  Jose  branch,  and  the 
Niles  branch.  I  do  not  know  of  any  other.  We  bought  a  road,  a  small 
road,  near  Gait,  a  narrow-gauge  road ;  but  that  did  not  connect  with 
the  Central  Pacific.  It  crossed  the  Central  and  went  down  to  Stockton 
Slough. 

Senator  MORGAN.  I  do  not  want  the  whole  story  of  those  roads.  I 
want  to  know 

Mr.  HUNTINGTON.  I  am  giving  you  an  explanation.  The  next  road — 
the  Stockton  and  Copperopolis — came  down  to  Stockton  and  crossed 
the  Central  Pacific  and  went  down  to  the  water  at  Stockton,  and  made 
connection  with  steamers  there. 

Senator  MORGAN.  Did  you  build  that  road  ? 

Mr.  HUNTINGTON.  No;  we  bought  it. 

Senator  MORGAN.  What  did  you  give  for  it? 

Mr.  HUNTINGTON.  I  think  we  gave  $500,000  in  bonds  of  the  road. 
Senator  MORGAN.  What  bonds! 


GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS.  169 


Mr.  HUNTINGDON.  Bonds  of  the  Stockton  and  Copperopolis  road. 
It  was  owned  by  people  in  Holland  who  had  $1,000,000  in  8  per  cent 
bonds  that  were  issued  on  it. 

Senator  MORGAN.  And  you  bought  these  people  out? 

Mr.  HUNTINGTON.  No;  we  gave  them  $500,000  in  5  per  cent  bonds 
for  their  million  of  8  per  cent  bonds  and  the  stock. 

Senator  MORGAN.  What  5  per  cent  bonds  did  you  give  them? 

Mr.  HUNTINGTON.  The  5  per  cent  bonds  of  the  Stockton  and  Cop- 
peropolis road. 

Senator  MORGAN.  Then  there  were  bonds  issued  by  that  road? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  You  agreed  with  them  to  take  the  corporation  and 
to  issue  $500,000  in  5  per  cent  bonds? 

Mr.  HUNTINGTON.  No;  we  gave  them  $500,000  in  5  per  cent  bonds 
for  their  $1,000,000  in  8  per  cent  bonds,  and  all  the  stock. 

Senator  MORGAN.  Then  you  took  that  road  and  agreed  with  these 
stockholders  that  you  would  take  up  their  bonds  at  50  per  cent  of  their 
face  value  and  give  them,  instead,  bonds  issued  by  the  Stockton  and 
Copperopolis  road  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Who  guaranteed  those  bonds? 

Mr.  HUNTINGTON.  I  do  not  think  they  were  guaranteed  at  all,  except 
that  I  told  them  that  they  would  be  good. 

Senator  MORGAN.  For  whom  was  this  deal  made?  Was  it  made  for 
the  private  persons  engaged  in  these  various  companies,  or  was  it  made 
for  the  Central  Pacific  Company? 

Mr.  HUNTINGTON.  It  was  made  for  the  private  persons. 

Senator  MORGAN.  Has  that  property  ever  passed  into  the  ownership 
of  the  Central  Pacific? 

Mr.  HUNTINGTON.  No;  never. 

Senator  MORGAN.  Is  it  now  being  run  as  a  separate  corporation  and 
by  separate  directors? 

Mr.  HUNTINGTON.  It  is  now  a  part  of  the  Southern  Pacific,  I  think. 
It  is  connected  with  the  Southern  Pacific  at  Merced. 

Senator  MORGAN.  That,  then,  is  a  line  which  crosses  the  Central 
Pacific  and  runs  to  the  Southern  Pacific? 

Mr.  HUNTINGTON.  It  crosses  the  Central  Pacific  from  the  steamboat 
landing  at  Stockton,  goes  to  Milton,  and  runs  at  the  west  base  of  the 
Sierra  Nevada  to  Merced,  about  100  miles. 

Senator  MORGAN.  And  there  it  lapses  into  the  Southern  Pacific? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Then  this  deal  was  not  made  in  the  interest  of  the 
Central  Pacific,  but  in  the  interest  of  the  Southern  Pacific  ? 

Mr.  HUNTINGTON.  No;  the  Southern  Pacific,  I  think,  at  that  time 
was  not  as  much  of  a  corporation  as  it  is  to-day. 

Senator  MORGAN.  That  is  very  likely,  but  that  does  not  answer  the 
question. 

Mr.  HUNTINGTON.  I  said  it  was  not. 

Senator  MORGAN.  I  asked  you  the  question,  whether  the  deal  was 
not  made  in  the  interest  of  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  do  not  think  it  was. 

Senator  MORGAN.  Was  it  made  in  the  interest  of  the  Central 
Pacific? 

Mr.  HUNTINGTON.  My  impression  is  that  it  was  made  in  the  interest 
of  the  Western  Development  Company.  That  is  what  that  company 
was  organized  for. 


170  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  And  for  the  benefit  of  neither  the  Central  Pacific 
nor  the  Southern  Pacific? 

Mr.  HUNTINGTON.  No;  but  the  Central  Pacific  has  benefited  by  it, 
and  so  has  the  Southern  Pacific;  because,  instead  of  running  to  the 
water,  we  bring  the  stuff  to  Milton,  I  believe. 

Senator  MORGAN.  Now  let  us  leave  that  road  and  come  to  the  next 
road  that  you  built  to  connect  with  the  Central  Pacific,  under  the 
powers  contained  in  the  charters  of  either  of  those  companies,  the 
Western  Development  Company  or  the  Pacific  Improvement  Company. 

Mr.  HUNTINGTON.  We  had  no  right  to  build  roads  under  those  char- 
ters. We  had  no  charters  to  build  roads,  excepting  as  we  bought  and 
controlled  them. 

Senator  MORGAN.  It  was  a  sort  of  universal  improvement  company? 

Mr.  HUNTINGTON.  Perhaps  we  might  call  it  so. 

Senator  MORGAN.  Then,  when  you  found  some  railroad  company  in 
existence,  or  when  you  found  a  railroad  laid  out.  this  Pacific  Improve- 
ment Company  went  to  work  and  built  it  for  them  ? 

Mr.  HUNTINGTON.  We  had  the  right  to  buy. 

Senator  MORGAN.  I  ask  you  one  question  and  you  commence  at 
another  different  place.  I  repeat  the  question.  When  you  found  a 
railroad  company  chartered,  the  line  surveyed  and  ready  for  the  oper- 
ation of  building,  this  Western  Development  Company,  or  the  Pacific 
Improvement  Company,  went  to  work 

Mr.  HUNTINGTON.  They  did  not  operate  at  the  same  time. 

Senator  MORGAN.  Well,  this  Western  Development  Company  went 
to  work  and  took  the  contract  and  built  the  road? 

Mr.  HUNTINGTON.  If  they  took  the  contract,  of  course  they  built  the 
road.  They  did  not  take  everything  that  was  offered. 

Senator  MORGAN.  I  am  talking  about  the  roads  that  were  actually 
built,  and  that  are  connected  with  the  Central  Pacific  road.  In  regard 
to  those  roads  that  had  been  actually  built,  and  that  connected  with 
the  Central  Pacific,  did  the  Western  Development  Company  become 
the  company  of  execution,  and  did  it  build  the  road? 

Mr.  HUNTINGTON.  Yes;  I  think  so. 

Senator  MORGAN.  Tell  the  next  road,  in  order  of  point  of  time,  that 
was  built?  You  have  mentioned  the  Stockton  and  Copperopolis. 

Mr.  HUNTINGTON.  I  think  we  went  to  building  the  Southern  Pacific. 
The  California  Pacific  we  bought. 

Senator  MORGAN.  You  do  not  understand  that  the  Southern  Pacific 
was  ever  connected  with  the  Central  Pacific  except  physically  ? 

Mr.  HUNTINGTON.  All  the  roads  in  California  are  connected  physically. 

Senator  MORGAN.  I  am  speaking  of  those  roads  in  California  that 
were  built  as  feeders  to  the  Central  Pacific.  Was  the  Southern  Pacific 
built  as  a  feeder? 

Mr.  HUNTINGTON.  Not  at  all.  The  Southern  Pacific  and  the  Central 
Pacific  started  off  in  different  directions. 

Senator  MORGAN.  But  the  Southern  Pacific  and  Central  Pacific  are 
connected  at  one  end? 

Mr.  HUNTINGTON.  Yes;  at  San  Francisco. 

Senator  MORGAN.  The  Southern  Pacific  was  not  built  as  a  feeder  to 
the  Central  Pacific? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  What  was  the  next  road  built  as  a  feeder  to  the 
Central  Pacific  and  actually  connected  with  it? 

Mr.  HUNTINGTON.  I  do  not  know  that  any  roads  were  built  as  feeders 
to  the  Central  Pacific. 


GOVERNMENT   DEBT   OF   THE    PACIFIC   RAILROADS.  171 

Senator  MORGAN.  You  mentioned  two  or  three  roads  that  were  built 
by  this  Western  Development  Company.  What  was  the  next  one  after  ( 
the  Stockton  and  Copperopolis? 

Mr.  HUNTINGTON.  1  can  not  say  exactly.  I  do  not  think  that  we 
built  a  road  especially  to  connect  with  the  Central  Pacific,  but  merely 
to  accommodate  certain  localities. 

Senator  MORGAN.  With  outlets  to  the  Central  Pacific? 

Mr.  HUNTINGTON.  Or  to  any  railroad. 

Senator  MORGAN.  I  am  talking  about  outlets  to  the  Central  Pacific. 
What  was  the  next  road  you  built  with  such  outlet? 

Mr.  HUNTINGTON.  I  do  not  think  of  any  other;  and  these  were  not 
built  for  that  purpose. 

Senator  MORGAN.  You  have  already  mentioned  the  Copperopolis  and 
the  Southern  Pacific. 

Mr.  HUNTINGTON   Yes;  but  they  were  not  built  as  feeders. 

Senator  MORGAN.  What  other  roads  did  you  build? 

Mr.  HUNTINGTON.  As  feeders? 

Senator  MORGAN.  No. 

Mr.  HUNTINGTON.  We  built  a  road  from  Bakersfield  to  Asphalt. 

Senator  MORGAN.  Had  this  road  connection  with  the  Central  Pacific? 

Mr.  HUNTINGTON.  No;  with  the  Southern  Pacific.  I  do  not  think  we 
built  any  others  as  feeders  to  the  Central  Pacific. 

Senator  MORGAN.  Or  having  a  direct  connection  with  it — one  end  of 
the  road  joining  with  the  other — call  it  direct  or  indirect? 

Mr.  HUNTINGTON.  I  do  not  think  of  any.  The  Sacramento  and  Pla- 
cerville  road  connected  with  the  Central,  but  it  was  built  to  run  with 
the  California  Pacific  across  the  river  to  Sacramento. 

Senator  MORGAN.  Does  that  road  connect  with  the  Central  Pacific? 

Mr.  HUNTINGTON.  It  crosses  it  at  Sacramento,  but  it  does  not  belong 
to  us.  The  people  who  built  it  work  in  harmony  with  those  who  built 
the  California  Pacific. 

Senator  MORGAN.  To  whom  does  that  road  belong  now? 

Mr.  HUNTINGTON.  I  think  to  the  California  and  Northern. 

Senator  MORGAN.  To  whom  does  the  California  and  Northern  belong? 

Mr.  HUNTINGTON.  To  the  shareholders— the  Southern  Pacific,  I 
think. 

Senator  MORGAN.  The  California  and  Northern  belongs  to  the  South- 
ern Pacific,  and  that  is  a  Kentucky  corporation? 

Mr.  HUNTINGTON.  Yes;  I  call  it  the  Southern  Pacific  Company. 

Senator  MORGAN.  In  the  bills  that  you  have  presented  here  you  have 
offered  to  give  a  mortgage  on  certain  railroad  properties  in  addition  to 
the  Central  Pacific  line. 

Mr.  HUNTINGTON.  They  differ  from  the  aided  line.  I  mean  these 
three  branches. 

Senator  MORGAN.  What  three  branches? 

Mr.  HUNTINGTON.  The  branches  from  Eoseville  to  Coles,  and  from 
Lathrop  to  Fresno,  and  from  Niles  to  Oakland. 

Senator  MORGAN.  Take  the  Lathrop  and  Fresno.  Does  that  connect 
with  the  Central  Pacific? 

Mr.  HUNTINGTON.  It  is  part  of  the  Central  Pacific. 

Senator  MORGAN.  Who  built  that  line? 

Mr.  HUNTINGTON.  It  was  built  by  the  same  organization. 

Senator  MORGAN.  When? 

Mr.  HUNTINGTON.  It  was  commenced  in  1871  and  was  completed 
within  a  reasonable  time. 


172  GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  It  was  commenced  after  the  Central  Pacific  had 
been  built? 

Mr.  HUNTINGDON.  Yes. 

Senator  MORGAN.  And  paid  for? 

Mr.  HUNTINGTON.  I  should  think  so. 

Senator  MORGAN.  Then  we  have  another. 

Mr.  HUNTINGTON.  That  is  part  of  the  Central  Pacific. 

Senator  MORGAN.  I  am  talking  about  those  roads  or  parts  of  roads 
that  were  added  to  the  Central  Pacific  after  that  road  was  completed 
and  paid  for. 

Mr.  HUNTINGTON.  It  is  a  part  of  the  road. 

Senator  MORGAN.  I  am  talking  about  the  roads  added  to  the  Central 
Pacific  after  the  Central  Pacific  had  been  built  and  paid  for. 

Mr.  HUNTINGTON.  The  road  between  Ogden  and  San  Jose  is  the  Cen- 
tral Pacific.  The  road  from  Lathrop  to  Fresno  was  built  first,  and  then 
the  next,  as  1  recollect,  was  the  road  from  B-oseville  to  Coles. 

Senator  MORGAN.  Take  the  road  from  Lathrop  to  Fresno.  Was  that 
built  under  a  separate  charter? 

Mr.  HUNTINGTON.  I  think  not.    I  am  quite  sure  it  was  not. 

Senator  MORGAN.  You  have  a  habit  of  saying,  "I  think."  What 
makes  you  think  so? 

Mr.  HUNTINGTON.  That  work  was  done  in  California.  I  am  quite 
sure  that  I  have  never  seen  the  papers.  I  would  not  like  to  say  it  was 
positively  so.  I  wish,  as  you  are  particular,  to  be  particular  also. 

Senator  MORGAN.  You  know  whether  it  was  built  under  the  charter 
of  Congress  or  of  the  State? 

Mr.  HUNTINGTON.  My  impression  is  that  it  was  built  under  the 
charter  of  the  Central  Pacific. 

Senator  MORGAN.  Under  the  charter  granted  by  Congress  ? 

Mr.  HUNTINGTON.  No;  not  especially. 

Senator  MORGAN.  Then  by  what  authority? 

Mr.  HUNTINGTON.  The  authority  of  the  State  of  California. 

Senator  MORGAN.  Then  it  was  a  separate  company  acting  under  a 
charter  from  the  State  of  California? 

Mr.  HUNTINGTON.  The  Central  Pacific  was  also  built  under  a  State 
charter  as  well  as  under  the  legislation  of  Congress  of  1862  and  1864, 
which  gave  it  certain  rights.  Just  how  far  these  rights  extended  I  do 
not  know,  but  it  was  commenced  under  a  California  charter.  The 
grant  of  Government  lands  was  given  to  the  Central  Pacific  of  Cali- 
fornia, the  charter  being  created  under  the  laws  of  that  State. 

Senator  MORGAN.  And  that  was  the  charter  adopted  by  the  United 
States  Government? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  there  has  been  no  charter  since  that  for  the 
road  from  Lathrop  to  Fresno  ? 

Mr.  HUNTINGTON.  ]STo;  we  changed  the  name.  The  charter  of  the 
Oregon  road  was  granted  to  another  company  entirely. 

Senator  MORGAN.  Keep  to  the  Lathrop  Company. 

Mr.  HUNTINGTON.  My  opinion  is — and  still  I  am  in  doubt  about  it 
when  I  think  of  the  other — I  can  not  say. 

Senator  MORGAN.  Was  that  road  from  Lathrop  to  Fresno  built  by  a 
separate  board  of  directors,  different  from  the  board  of  directors  of  the 
Central  Pacific,  or  was  it  built  by  the  board  of  directors  that  managed 
and  controlled  the  Central  Pacific? 

Mr.  HUNTINGTON.  If  it  was  the  same  organization,  of  course  it  was 
the  same  board  of  directors  j  if  it  was  not  the  same  orgaiiization,  the 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  173 

directors  may  have  been  mixed.  Still  I  think  it  was  built  by  the  Cen- 
tral Pacific  under  its  California  charter. 

Senator  MORGAN.  Was  it  built  by  the  Central  Pacific  under  the 
order  of  that  body  corporate  that  it  should  be  built? 

Mr.  HUNTINGTON.  Yes;  I  am  pretty  sure  that  that  is  so. 

Senator  MORGAN.  And  ever  since  it  has  been  built  it  has  been  con- 
sidered a  part  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  It  was  always  a  part  of  the  Central  Pacific. 

Senator  MORGAN.  What  is  the  length  of  it? 

Mr.  HUNTINGTON.  As  I  recollect,  146.3  miles. 

Senator  MORGAN.  About  how  much  a  mile  did  it  cost  to  build  it? 

Mr.  HUNTINGTON.  I  think  the  mortgage  upon  it  is  $40,000  a  mile. 

Senator  MORGAN.  How  much  a  mile  did  it  cost  to  build  it? 

Mr.  HUNTINGTON.  I  can  not  say.    It  cost  probably  $40,000  a  mile. 

Senator  MORGAN.  Is  it  through  a  mountainous  country? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Does  it  cross  rivers? 

Mr.  HUNTINGTON.  There  are  a  great  many  expensive  rivers  to  be 
crossed. 

Senator  MORGAN.  The  road  was  built  with  wooden  bridges? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  those  have  been  replaced  with  iron  bridges'? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Do  you  state  that  it  cost  $40,000  a  mile  to  build 
that  line? 

Mr.  HUNTINGTON.  I  think  so.  You  see  the  company  did  not  get  par 
for  those  bonds.  Some  of  them  sold  at  60  per  cent. 

Senator  MORGAN.  I  do  not  want  to  wander  through  the  whole  history 
of  the  company.  I  want  to  know  as  to  this  particular  enterprise.  Did 
you  pay  out  bonds  ? 

Mr.  HUNTINGTON.  I  think  $40,000  a  mile. 

Senator  MORGAN.  What  did  you  do  with  those  bonds? 

Mr.  HUNTINGTON.  We  used  them,  I  suppose,  to  build  the  road. 

Senator  MORGAN.  Were  they  paid  over  to  any  construction  company? 

Mr.  HUNTINGTON.  I  think  they  were  paid  either  to  the  Pacific 
Improvement  Company  or  to  the  Contract  and  Finance  Company. 

Senator  MORGAN.  They  were  paid  to  one  of  those  two  companies? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  You  did  all  the  work  and  got  all  the  bonds? 

Mr.  HUNTINGTON.  I  should  think  so,  but  they  were  used  finally  to 
build  the  road. 

Senator  MORGAN.  Where  are  those  bonds  now  ? 

Mr.  HUNTINGTON.  I  do  not  know;  I  have  not  seen  one  of  them  since 
the  road  was  built. 

Senator  MORGAN.  Did  you  ever  own  any  of  them? 

Mr.  HUNTINGTON.  No;  I  never  owned  one  of  them. 

Senator  MORGAN.  Were  they  sold  in  the  market? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  To  anybody  who  would  buy  themf 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  At  what  rate? 

Mr.  HUNTINGTON.  I  should  say  they  averaged  87  or  88  or  90. 

Senator  MORGAN.  Were  they  protected  by  any  guaranty  from  the 
Central  Pacific  Company? 

Mr.  HUNTINGTON.  They  were  a  bond  of  the  Central  Pacific,  and 
therefore  the  company  was  responsible  for  them. 


174  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  The  company  was  responsible  for  what? 

Mr.  HUNTINGTON.  Ivcsponsible  for  those  bonds. 

Senator  MORGAN.  Aiid  still  is  responsible  for  them? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Is  that  mortgage  still  overhanging  that  road! 

Mr.  HUNTINGTON.  It  is. 

Senator  MORGAN.  For  the  whole  amount? 

Mr.  HUNTINGTON.  No;  there  is  a  sinking  fund. 

Senator  MORGAN.  Have  any  of  the  bonds  been  actually  taken  up? 

Mr.  HUNTINGTON.  Bonds  have  been  taken  up  that  are  in  the  sinking 
fund. 

Senator  MORGAN.  To  what  amount? 

Mr.  HUNTINGTON.  To  whatever  amount  the  requirement  was-  I  do 
not  know. 

Senator  MORGAN.  Have  you  no  idea? 

Mr.  HUNTINGTON.  Well,  no;  I  can  get  the  amount. 

Senator  MORGAN.  Was  there  a  separate  stock  issued  on  that  road? 

Mr.  HUNTINGTON.  No;  I  think  not.  There  is  none  outstanding  now, 
and  I  am  quite  sure  there  never  was. 

Senator  MORGAN.  The  stock  of  the  Central  Pacific  covered  that 
property  ? 

Mr.  HUNTINGTON.  It  is  a  part  of  the  Central  Pacific  if  the  Central 
Pacific  built  it,  and  I  am  inclined  to  think  it  did. 

Senator  MORGAN.  Then  that  road  was  really  owned  by  the  persons 
who  owned  the  Central  Pacific'? 

Mr.  HUNTINGTON.  Yes ;  it  was  owned  by  the  shareholders  of  the  Cen- 
tral Pacific. 

Senator  MORGAN.  And  it  was  really  built  by  the  same  persons? 

Mr.  HUNTINGTON.  The  same  persons  as  who? 

Senator  MORGAN.  As  owned  the  stock  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  No ;  I  do  not  think  it  was  built  by  the  same  per- 
sons. It  was  built  by  a  company. 

Senator  MORGAN.  I  am  talking  about  the  persons  engaged  in  both 
companies. 

Mr.  HUNTINGTON.  I  think  so.  There  may  have  been  some  persons 
in  one  who  were  not  in  the  other. 

Senator  MORGAN.  But,  in  effect,  they  were  virtually  built  by  the 
same  persons? 

Mr.  HUNTINGTON.  They  were  built  by  two  organizations — one  trad- 
ing with  another.  I  would  not  say  they  were  the  same  persons.  I  am 
quite  sure,  however,  that  some  of  them  are  the  same. 

Senator  MORGAN.  If  they  were  not  the  same,  state  those  who  were 
in  the  one  company  and  not  in  the  other. 

Mr.  HUNTINGTON.  I  do  not  know. 

The  committee  here  took  a  recess  until  2  p.  m. 

After  the  recess  the  examination  of  Mr.  Huntiugton  was  continued. 

Senator  MORGAN.  Are  there  any  other  roads  built  by  either  of  those 
two  companies  on  account  of  or  as  part  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  No;  I  think  not. 

Senator  MORGAN.  Did  the  Central  Pacific  contribute  any  money  or 
bonds  or  property  of  any  kind  to  the  construction  of  either  of  those 
lines  that  we  have  been  mentioning  that  run  into  and  form  a  part  of 
the  Central  Pacific  road? 

Mr.  HUNTINGTON.  Yes;  bonds  were  issued  by  the  Central  for  the 
road  from  Lathrop  to  Fresno  or  Goshen.  I  think  the  road  runs  up  to 
Goshen,  which  is,  I  think,  the  southern  end  of  it,  instead  of  Fresno. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  175 

Senator  MORGAN.  Each  of  those  roads  that  you  speak  of  is  considered 
the  property  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  They  are  part  of  the  Central  Pacific  property,  the 
same  as  the  line  to  San  Jose. 

Senator  MORGAN.  But  1  do  not  understand  that  you  know  whether 
they  were  built  under  a  separate  corporate  organization  or  whether  they 
were  built  under  the  corporate  organization  of  the  Central  Pacific. 

Mr.  HUNTINGTON.  I  think  they  must  have  been  built  under  the 
organization  of  the  Central  Pacific. 

Senator  MORGAN.  And  by  the  order  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  They  must  have  been. 

Senator  MORGAN.  So  that  you  always  considered  the  Central  Pacific 
Company  liable  for  the  debts  of  those  additional  roads? 

Mr.  HUNTINGTON.  Yes,  responsible  for  all  of  them. 

Senator  MORGAN.  When  you  add  those  roads  that  have  been  built, 
since  the  main  trunk  of  the  Central  Pacific  was  completed,  to  the  mileage, 
what  is  the  amount  of  the  mileage  of  the  entire  Central  Pacific  road  ? 

Mr.  HUNTINGTON.  As  I  recollect,  it  is  something  over  1,300  miles; 
between  1,300  and  1,400. 

Senator  MORGAN.  The  Central  Pacific  has  no  leased  roads? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  The  Southern  Pacific  has  a  number  of  leased  roads-? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  All  of  those  roads  about  which  we  have  been 
speaking  to-day  are  now  under  lease  to  the  Southern  Pacific  or  belong 
to  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  may  be  wrong  about  their  being  leased.  They 
are  operated  by  the  Southern  Pacific;  but  just  how  far  they  are  owned, 
or  whether  they  are  all  owned  or  not,  by  the  Southern  Pacific,  I  do  not 
know.  My  recollection  is  that  the  San  Francisco  Northern  is  not 
owned  by  the  Southern  Pacific. 

Senator  MORGAN.  It  is  leased  to  the  Southern  Pacific? 

Mr.  HUNTINGTON.  If  not  owned  it  is  leased. 

Senator  MORGAN.  But  all  the  roads  that  we  have  been  speaking  of 
either  belong  to  or  are  leased  by  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  think  they  have  all  been  consolidated  south  of 
San  Francisco  into  the  Southern  Pacific  Company.  In  the  State  of 
California,  and  east  of  there,  the  Southern  Pacific  Company  controls 
them  by  ownership. 

Senator  MORGAN.  Is  the  Pacific  Improvement  Company  still  an  organ- 
ization ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Does  that  company  own  any  stock  of  the  Central 
Pacific? 

Mr.  HUNTINGTON.  Not  that  I  know  of,  and  I  would  be  likely  to  know 
if  it  did. 

Senator  MORGAN.  Does  it  hold  any  stock  of  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  think  it  daes. 

Senator  MORGAN.  How  much  ? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  About  how  much  ? 

Mr.  HUNTINGTON.  I  think  they  have,  if  I  recollect  right,  15,000  or 
16,000  or  17,000  shares. 

Senator  MORGAN.  How  much  a  share? 

Mr.  HUNTINGTON.  One  hundred  dollars. 

Senator  MORGAN.  These  gentlemen  say  in  their  memorial :  "  The  same 


176  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

company,  we  are  informed,  own,  or  claim  to  own,  the  railroad's  interest 
in  the  bridge  at  Sacramento." 

Mr.  HUNTINGTON.  I  think  that  that  belongs  to  the  California  Pacific. 
We  did  not  build  the  California  Pacific.  The  bridge  was  built  as  a 
wagon-road  bridge,  and  then,  as  I  remember,  it  was  strengthened,  and 
the  California  Pacific  road  ran  over  it.  Now,  the  California  Pacific  has 
built  a  new  bridge  just  below  the  other,  and  I  think  they  are  running 
over  it  to-day,  or  if  not  to-day,  they  will  be  running  over  it  very  soon. 

Senator  MORGAN.  Then  that  bridge  does  not  belong  to  the  Pacific 
Improvement  Company? 

Mr.  HTJNTINGTON.  No;  it  belongs  to  the  California  Pacific. 

Senator  MORGAN.  And  the  California  Pacific  belongs  to  the  Pacific 
Improvement  Company? 

Mr.  HTJNTINGTON.  No. 

Senator  MORGAN.  Has  it  got  any  interest  in  the  stock  of  the  Pacific 
Improvement  Company? 

Mr.  HUNTINGTON.  I  am  not  sure.  I  am  inclined  to  think  that  it  has 
a  little,  but  I  am  not  sure.  It  isn't  very  much. 

Senator  MORGAN.  These  men  say  that  the  same  company  own  or 
claim  to  own  the  railroad's  interest  in  the  bridge  at  Sacramento. 

Mr.  HUNTINGTON.  I  am  not  surprised  that  they  say  that,  because  it 
isn't  true. 

Senator  MORGAN.  Also,  that  the  same  company  owns  the  ferryboat 
Piedmont  that  plies  between  Oakland  and  San  Francisco,  and  that  forms 
part  of  the  Central  Pacific  Railroad  Company's  line. 

Mr.  HUNTINGTON.  I  do  not  think  that  the  Pacific  Improvement 
Company  has  any  interest  in  it. 

Senator  MORGAN.  Or  did  have  ? 

Mr.  HUNTINGTON.  I  do  not  know  that  it  did  have,  but  I  am  quite 
sure  that  it  has  not  now. 

Senator  MORGAN.  Who  owns  the  ferryboats  on  that  part  of  the  line? 

Mr.  HUNTINGTON.  The  Central  Pacific  owns  a  part  of  them,  and  the 
California  Coast  Line  Railroad — I  think  that  is  what  it  is  called — owns 
some. 

Senator  MORGAN.  Those  boats  that  are  used  by  the  Central  Pacific; 
who  owns  them? 

Mr.  HUNTINGTON.  They  are  owned  by  the  Central  Pacific;  some  of 
them  run  to  Oakland  and  some  to  the  other  side  of  Alameda  Creek. 

Senator  MORGAN.  These  memorialists  say  that  this  company — the 
Pacific  Improvement  Company — owns  the  river  steamers  Modoc  and 
Apache.  Is  that  so  ? 

Mr.  HUNTINGTON.  I  do  not  think  it  does. 

Senator  MORGAN.  They  say  that  the  company  owns  the  railroad  office 
building  at  the  foot  of  Fourth  and  Townsend  streets  in  the  city  of  San 
Francisco.  Is  that  so? 

Mr.  HUNTINGTON.  The  Pacific  Improvement  Company  did  own  that 
building  at  the  corner  of  Fourth  and  Townsend  streets. 

Senator  MORGAN.  Who  owns  it  now? 

Mr.  HUNTINGTON.  My  impression  is  that  the  Pacific  Improvement 
Company  owns  it  now;  I  am  not  certain. 

Senator  MORGAN.  They  say  that  the  same  company  (the  Pacific 
Improvement  Company)  owns  the  Del  Monte  Hotel  at  Monterey.  Is 
that  so  ? 

Mr.  HUNTINGTON.  That  is  so;  I  am  quite  certain. 

Senator  MORGAN.  They  say  that  the  same  company  owns  the  prin- 
cipal part  of  the  lauds  formerly  belonging  to  the  old  company  in  and 


GOVERNMENT    DEBT   OF   THE   PACIFIC   RAILROADS.  177 

around  North  Berkeley,  and  the  depots  at  Sacramento  and  Los  Angeles. 
Is  that  so? 

Mr.  HUNTINGTON.  I  hardly  think  so,  and  I  know  it  isn't,  if  they  say 
it  is. 

Senator  MORGAN.  Can  you  not  give  a  better  reason  ? 

Mr.  HUNTINGTON.  That  is  a  very  good  reason,  but  I  do  not  think  the 
Pacific  Improvement  Company  has  any  interest  in  the  Sacramento  and 
Los  Angeles  depots. 

Senator  MORGAN.  Who  owns  the  Los  Angeles  depot? 

Mr.  HUNTINGTON.  The  Southern  Pacific  Railroad  Company. 

Senator  MORGAN.  And  the  depot  at  Sacrame,.  *o? 

Mr.  HUNTINGTON.  The  Pacific  Improvement  Company  had  nothing 
to  do  with  that. 

Senator  MORGAN.  To  whom  does  the  depot  at  Sacramento  belong? 

Mr.  HUNTINGTON.  To  the  Central  Pacific  Company — the  large  one. 
There  is  a  smaller  depot  there  that  belongs  to  the  Sacramento  and 
Placerville  Company.  It  is  now  owned  by  the  San  Francisco  Northern. 

Senator  MORGAN.  They  say  that  the  same  company  also  owns  the 
Central  Pacific  Eailroad  wharf  at  San  Pedro.  Is  that  true? 

Mr.  HUNTINGTON.  I  am  quite  sure  it  is  not.  The  wharf  was  built 
by  the  Northern  Pacific  Company. 

Senator  MORGAN.  They  say  also  that  the  same  company  formerly 
owned  or  assumed  to  own  the  Oakland  water  front  and  the  Mission  Bay 
property.  Is  that  true? 

Mr.  HUNTINGTON.  I  do  not  think  the  Pacific  Improvement  Company 
ever  owned  it. 

Senator  MORGAN.  They  say  that  it  owns  the  coal  mines  in  the  State 
of  Washington  and  in  Mexico,  from  whence  the  Central  Pacific  obtains 
its  coal.  Is  that  true? 

Mr.  HUNTINGTON.  It  does  not  own  any  coal  mines  in  Mexico;  and 
the  Central  Pacific  gets  very  little  coal  from  there.  The  coal  that  we 
get  there  is  mostly  used  in  Mexico. 

Senator  MORGAN.  What  do  you  say  as  to  the  coal  mines  in  the  State 
of  Washington? 

Mr.  HUNTINGTON.  I  think  that  the  Pacific  Improvement  Company 
owns  coal  mines  there. 

Senator  MORGAN.  And  sells  its  coal  to  the  Northern  Pacific? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  Does  the  Northern  Pacific  get  its  chief  supply  of 
coal  from  those  mines? 

Mr.  HUNTINGTON.  More  than  it  gets  from  any  other  source,  perhaps. 
Those  are  very  large  mines. 

Senator  MORGAN.  They  say  that  the  Pacific  Improvement  Company 
nets  two  millions  a  year  from  the  coal  it  supplies  to  the  Southern  and 
Central  Pacific  Kailroad  companies.  Is  that  so  ? 

Mr.  HUNTINGTON.  It  nets  very  little.  I  can  not  say  what  the  amount 
is.  They  sell  coal  to  the  railroads  there  for,  I  think,  two-thirds  of  what 
the  coal  is  selling  for  in  the  market. 

Senator  MORGAN.  Would  they  net  from  the  coal  sold  to  these  two 
roads  two  millions  a  year? 

Mr.  HUNTINGTON.  No,  nor  half  of  it;  I  do  not  think  they  would  net 
one-fourth  of  it.  The  coal  that  we  bought  from  everywhere  up  to  four 
years  ago  was  costing  us  $6  or  $7  a  ton,  but  now  we  have  got  the  price 
down. 

Senator  MORGAN.  Has  the  Central  Pacific  or  the  Southern  Pacific, 
or  both  of  them,  any  interest  in  the  street  railroads  of  San  Francisco? 
P  R 12 


178  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  think  not. 

Senator  MORGAN.  To  whom  do  these  street  railroads  belong? 

Mr.  HUNTINGTON.  To  the  shareholders;  they  have  a  great  many 
shareholders.  The  Market  Street  Company  owns  perhaps  most  of  the 
street  railroads  of  San  Francisco,  and  it  has  a  great  many  shareholders. 
The  different  roads  were  consolidated,  and  their  shareholders  came  in 
and  took  shares  in  the  consolidated  company.  The  Central  Pacific 
and  the  Southern  Pacific,  I  think,  have  no  interest  in  these  street  rail- 
roads, and  I  do  not  think  they  ever  did  have.  At  least  I  have  no 
recollection  of  their  having. 

Senator  MORGAN.  The  Central  Pacific  and  the  Southern  Pacific,  if  I 
understand  you,  either  own  or  control  a  line  of  steamers  from  San 
Francisco  to  New  York  by  the  way  of  Panama? 

Mr.  HUNTINGTON.  No;  the  people  who  control  the  Union  Pacific  and 
the  Central  Pacific  own  the  steamers.  Neither  company  has  any  shares 
in  them. 

Senator  MORGAN.  They  have  freight  arrangements  with  that  com- 
pany? 

Mr.  HUNTINGTON.  Yes;  they  were  organized  mostly  to  run  in  con- 
nection with  them,  to  pick  up  as  much  trade  as  we  can  from  eastern 
Asia.  The  steamship  company  does  not  own  any  steamers;  it  charters 
them. 

Senator  MORGAN.  These  men  say  that  Mr.  Huntington  and  his  asso- 
ciates destroyed  a  part  of  the  so-called  Record  Book  of  Corporation 
Debts,  which  book  they  were  required  by  law  to  keep.  Was  there  such 
a  record  book  kept  by  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  I  should  say  so,  if  the  law  required  it  to  be  kept. 
We  were  very  particular  about  such  things. 

Senator  MORGAN.  Was  that  record  book  destroyed  with  the  rest  of 
fche  papers  ? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  If  you  wanted  to  find  such  a  record  as  that,  would 
you  know  where  to  go  for  it? 

Mr.  HUNTINGTON.  No.  If  I  wanted  it,  I  should  inquire  about  the 
office  for  it. 

Senator  MORGAN.  Would  you  expect  to  find  it? 

Mr.  HUNTINGTON.  It  depends  upon  what  it  was.  If  it  was  a  record 
book  of  a  part  of  the  operations  of  the  road,  I  should  think  it  went  with 
the  other  papers;  but  if  it  was  something  which  the  statute  of  the 
State  required  to  be  kept,  I  would  expect  to  find  it. 

Senator  MORGAN.  But  you  do  not  know  whether  it  now  exists  or  not? 

Mr.  HUNTINGTON.  I  do  not. 

Senator  MORGAN.  These  memorialists  say  that  for  fifteen  years  last 
past  the  Central  Pacific  Railroad  Company  and  the  Southern  Pacific 
Company  have  owed  taxes  to  the  State  of  California  always  amounting 
to  from  $500,000  to  $1,500,000,  and  that  for  four  years  of  that  time  they 
owed  $400,000  to  the  school  fund  of  the  State.  Is  that  true? 

Mr.  HUNTINGTON.  I  do  not  know.  They  overtaxed  us  very  much,  as 
we  thought,  and  we  went  to  the  courts  and  the  courts  sustained  us, 
deciding  that  we  were  right.  They  taxed,  for  instance,  the  Summit 
Tunnel,  and  we  thought  that  it  was  not  a  hole  to  be  taxed,  and  we  went 
into  the  courts  about  it.  They  did  many  things  like  that. 

Senator  MORGAN.  What  became  of  that  suit;  has  it  been  ended? 

Mr.  HUNTINGTON.  Oh,  yes.  There  is  a  fragment  of  it  somewhere  in 
the  courts  now. 

Senator  MORGAN.  Was  that  a  suit  which  involved   $535,000  of  a 


GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  179 

tax  due  by  the  Southern  Pacific  and  Central  Pacific  to  the  State  of 
California,  and  for  taxes  levied  and  assessed  for  the  year  1887  on  which 
a  suit  was  pending  in  the  State  courts  which  has  now  been  transferred 
to  the  United  States  court? 

Mr.  HUNTINGTON.  One  case  has  been  decided.  It  went  to  the 
Supreme  Court  and  was  decided  in  our  favor.  I  think  there  is  another 
case  either  in  the  Supreme  Court  or  on  its  way  there. 

Senator  MORGAN.  The  Government  of  the  United  States,  I  suppose, 
has  been  paying  interest  regularly  on  the  bonds  issued  to  the  Central 
Pacific  Company? 

Mr.  HUNTINGTON.  I  suppose  so. 

Senator  MORGAN.  What  is  the  rate  of  interest? 

Mr.  HUNTINGTON.  Six  per  cent. 

Senator  MORGAN.  When  do  the  first  of  these  bonds  maturef 

Mr.  HUNTINGTON.  A  few  matured  last  year. 

Senator  MORGAN.  Were  they  paid? 

Mr.  HUNTINGTON.  I  understand  so. 

Senator  MORGAN.  Paid  by  the  Government  of  the  United  States? 

Mr.  HUNTINGTON.  No;  they  were  paid  out  of  the  sinking  fund. 

Senator  MORGAN.  Payment  was  made  by  the  Government  of  the 
United  States,  although  it  may  have  been  made  out  of  the  sinking  fund? 

Mr.  HUNTINGTON.  They  naturally  took  the  bonds  out  of  the  sinking 
fund  to  pay  for  them. 

Senator  MORGAN.  And  all  the  bonds  of  the  Government  now  out- 
standing pay  6  per  cent  interest? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  the  Government  has  been  paying  6  per  cent 
interest  from  the  beginning  of  the  transaction  down  to  date? 

Mr.  HUNTINGTON.  As  I  recollect  the  contract,  that  is  so. 

Senator  MORGAN.  Between  man  and  man,  if  one  is  paying  out  money 
under  an  agreement  for  another  during  a  long  series  of  years,  the  party 
for  whom  the  money  is  paid  would  naturally,  on  the  final  settlement  of 
the  account,  have  to  pay  interest  on  it? 

Mr.  HUNTINGTON.  I  do  not  know.  That  depends  upon  various  things. 
When  the  law  was  passed  originally  the  Government  was  to  pay  the 
interest,  and  nothing  was  due  to  the  Government  until  the  maturity  of 
the  bonds. 

Senator  MORGAN.  Do  you  admit  that  the  Central  Pacific  is  in  debt  to 
the  Government  of  the  United  States  for  the  interest  that  it  has  been 
paying? 

Mr.  HUNTINGTON.  I  suppose  so.  That  is  one  of  those  things  which 
the  legal  department  of  the  company  always  attends  to. 

Senator  MORGAN.  The  sinking  fund  was  provided  as  a  means  of 
recouping  or  reimbursing  the  United  States? 

Mr.  HUNTINGTON.  Yes.  We  were  about  preparing  a  sinking  fund; 
in  fact,  we  had  got  a  resolution  passed  through  the  board  of  directors 
of  the  Central  Pacific  for  a  sinking  fund,  but  when  the  Thurman  law 
was  passed  we  stopped  it.  The  money  that  went  to  the  sinking  fund 
established  by  that  act  was  invested  in  Government  bonds  at  as  high 
as  135;  so  that  we  got  very  little  interest  on  that  investment,  whereas 
we  could  have  invested  the  money  at  6  per  cent. 

Senator  MORGAN.  In  the  proposition  that  you  submit  here  for  settle- 
ment by  getting  an  extension  of  the  date,  do  you  include  the  interest 
paid  by  the  United  States  on  these  bonds  ? 

Mr.  HUNTINGTON.  What  was  proposed  was,  that  you  find  out  what 
the  whole  sum,  would  be  on  the  1st  of  July  next,  adding  the  interest  up 


180  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

to  the  maturity  of  the  bonds  in  1899,  aiid  then  treat  that  as  a  fixed  debt 
due  to  the  Government. 

Senator  MORGAN.  In  making  up  this  aggregate  of  indebtedness,  do 
you  include  in  your  proposition  not  only  the  interest  paid  by  the  Gov- 
ernment, but  the  interest  due  on  that  interest? 

Mr.  HUNTINGTON.  I  do  not  think  so.  That  is  a  thing  for  the  law  to 
decide.  But  the  law  was,  that  the  debt  did  not  become  due  until  the 
maturity  of  the  bonds.  You  see  that  the  Government  saved  very 
largely  by  the  building  of  those  roads.  The  Government  had  paid 
$1,750,000  to  Wells,  Fargo  &  Co.  for  carrying  a  little  bit  of  mail 
between  the  ends  of  the  road  until  they  were  completed,  and  when 
the  roads  were  completed  we  carried  upon  them  five  hundred  times  the 
weight  of  mail,  and  probably  more,  and  I  do  not  think  that  we  got  over 
$300,000  a  year  for  carrying  five  hundred  times  the  weight  of  mail. 
Then  in  one  year  (1854  it  may  have  been)  the  Government  paid  over 
$18,000,000  for  keeping  things  reasonably  quiet  in  and  about  Utah. 

Senator  MORGAN.  In  the  meantime  the  Government  has  supplied 
you  with  power  to  carry  more  than  500  tons  of  weight. 

Mr.  HUNTINGTON.  Yes ;  but  that  is  what  was  paid. 

Senator  MORGAN.  I  want  to  know  whether,  in  the  proposition  you 
submit  here,  you  include  in  the  aggregate  indebtedness  of  the  Central 
Pacific  to  the  United  States  the  interest  which  the  Government  has 
paid  on  those  bonds,  and  interest  upon  that  interest? 

Mr.  HUNTINGTON.  I  should  say  not  j  I  do  not  know  why,  in  the  world, 
we  should,  as  I  understand  the  law. 

Senator  MORGAN.  You  think  that  the  Government  of  the  United 
States  was  paying  this  interest  upon  a  debt  that  it  owed,  not  upon  a 
debt  that  you  owed? 

Mr.  HUNTINGTON.  It  was  paying  it  not  only  for  a  consideration,  but 
for  a  good  consideration. 

Senator  MORGAN.  Was  that  the  sole  consideration  that  induced  the 
Government  to  put  the  second-mortgage  bonds  ahead  of  the  first? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  You  think  it  was  the  same  thing? 

Mr.  HUNTINGTON.  About  the  same  thing. 

Senator  MORGAN.  You  have  been  here  with  several  propositions  for 
the  settlement  of  this  transaction  at  different  times,  have  you  not? 

Mr.  HUNTINGTON.  Hardly  that.  I  have  been  here  a  number  of  times 
to  have  some  arrangement  made  with  the  Government — something  so 
that  I  could  see  that  we  had  reached  the  beginning  of  the  end  of  a  set- 
tlement. I  have  said  frequently  that  I  wanted  to  pay  the  Government 
100  cents  on  the  dollar  on  the  principal  of  the  debt,  and  as  much  interest 
as  we  could  pay  currently — as  much  as  we  can  get  out  of  the  road  after 
the  current  expenses  and  after  the  fixed  expenses  are  paid,  and  these 
have  to  be  paid. 

Senator  MORGAN.  You  do  not  wish  to  occupy  the  attitude  of  making 
any  proposition  to  the  Government? 

Mr.  HUNTINGTON.  The  proposition  is  that,  in  general  terms. 

Senator  MORGAN.  I  was  asking  whether  you  had  made  any  propo- 
sition ? 

Mr.  HUNTINGTON.  That  is  the  proposition — to  pay  100  cents  on  the 
dollar,  as  soon  as  we  can,  by  making  fixed  payments  at  fixed  times, 
until  it  is  all  paid;  and  if  we  ever  get  so  as  not  to  be  able  to  pay,  and 
there  is  a  default  of  six  months  in  payment,  the  Government  may  go  in 
without  legislation,  and  without  court  proceedings,  and  take  the  prop- 
erty, and  the  whole  of  it.  That  has  been  my  proposition. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  181 

Senator  MORGAN.  You  have  made  two  or  three  propositions,  have 
you  not? 

Mr.  HUNTINGTON.  Substantially  in  this  way.  Some  years  ago  we 
proposed  that  the  Government  should  pay  off  the  Government  debt  and 
the  first-mortgage  debt  and  put  them  in  a  hundred-year  bond,  and  I 
would  guarantee  that  the  Government  would  have  the  money  in  sixty 
days. 

Senator  MORGAN.  Your  first  proposition  was  for  a  seventy-five-year 
bond,  was  it  not"? 

Mr.  HUNTINGTON.  Perhaps  it  was. 

Senator  MORGAN.  And  the  second  one  you  raised  to  a  hundred-year 
bond? 

Mr.  HUNTINGTON.  The  earnings  of  the  road  had  been  growing  less 
and  less  every  year,  so  that  it  would  require  a  longer  time  to  pay  the 
debt. 

Senator  MORGAN.  The  third  proposition  is  the  one  embraced  in  Sen- 
ator Frye's  bill? 

Mr.  HUNTINGTON.  That  is  the  proposition.  I  can  hardly  tell  what 
is  in  it. 

Senator  MORGAN.  That  is  the  proposition  which  you  now  submit? 

Mr.  HUNTINGTON.  That  so  much  is  to  be  paid  to  the  Government. 

Senator  MORGAN.  In  more  than  one  hundred  years? 

Mr.  HUNTINGTON.  No ;  not  more  than  one  hundred  years,  if  you  com- 
mence with  a  fixed  sum  to-day. 

Senator  MORGAN.  That  would  be  equal  to  an  extension  of  the  whole 
amount;  and  you  change  the  rate  of  interest  in  each  of  these  proposi- 
tions. 

Mr.  HUNTINGTON.  Yes.  I  thought  that  1|  per  cent  was  enough,  but 
I  afterwards  thought  I  would  let  that  go. 

Senator  MORGAN.  What  is  the  rate  of  interest  in  your  present  prop- 
osition ? 

Mr.  HUNTINGTON.  I  do  not  see  where  we  can  pay  more  than  2  per 
cent.  There  is  nothing  in  sight  that  will  allow  us  to  do  it.  I  have 
looked  the  matter  over  very  carefully. 

Senator  MORGAN.  Does  Senator  Frye's  bill  contemplate  paying  2  per 
cent  interest? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  Your  first  proposition  was  1£  per  cent,  or  was  it  1 
per  cent? 

Mr.  HUNTINGTON.  It  was  1£  per  cent.  I  did  not  see  my  way  clear 
to  offer  any  more.  Of  course,  we  will  have  a  little  less  interest  to  pay 
on  the  first-mortgage  bonds  when  we  extend  them. 

Senator  MORGAN.  If  the  Congress  of  the  United  States  should  not 
accept  your  proposition  as  couched  in  the  bill  of  Senator  Frye — 

Mr.  HUNTINGTON.  I  do  not  know  what  that  bill  is  exactly. 

Senator  MORGAN.  Whatever  your  last  proposition  was.  You  asked 
us  to  print  it  at  the  last  session,  and  we  did  so. 

Mr.  HUNTINGTON.  I  know  there  was  such  a  bill,  but  I  can  not  tell 
who  originated  it. 

Senator  MORGAN.  The  bill  was  prepared  by  your  counsel  and  brought 
here,  and  we  had  it  printed.  Suppose  that  the  present  Congress  passed 
a  bill  accepting  your  proposition  just  as  you  make  it,  what  authority 
have  you  to  show  us  that  you  have  the  right  to  make  it? 

Mr.  HUNTINGTON.  I  represent,  pretty  largely,  the  Central  Pacific 
Railroad  Company,  and  we  have  talked  the  matter  over.  We  have 
talked  it  in  this  way :  that  we  will  do  anything  we  can,  but  we  do  not 
want  to  agree  to  a  thing  that  we  can  not  do. 


182  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Would  such  questions,  under  your  charter  and 
by-laws,  have  to  be  disposed  of  at  a  stockholders'  meeting  or  at  a  meet- 
ing of  the  board  of  directors? 

Mr.  HUNTINGTON.  I  suppose  at  a  meeting  of  the  board  of  directors. 

Senator  MORGAN.  Unless  it  is  a  very  peculiar  organization,  I  should 
think  that  such  a  question  should  be  decided  by  the  stockholders.  Do 
you  think  that  the  board  of  directors  has  authority  to  sell  out  that 
railroad  property  ? 

Mr.  HUNTINGTON.  J  do  not  understand  that  we  are  selling  it  out.  I 
think  we  have  a  right  to  do  whatever  is  necessary  to  do  under  the  bill 
before  your  committee. 

Senator  MORGAN.  Conceding,  for  the  sake  of  argument,  that  you 
have  got  such  right,  has  the  board  of  directors  ever  taken  any  special 
action  on  this  subject? 

Mr.  HUNTINGTON.  I  do  not  know  that  we  have,  because  we  saw  no 
necessity,  but  I  have  talked  it  over  with  every  member  of  the  board. 

Senator  MORGAN.  With  Government  directors  and  all? 

Mr.  HUNTINGTON.  We  have  no  Government  directors. 

Senator  MORGAN.  You  have  come  to  an  agreement  among  yourselves 
formally  ? 

Mr.  HUNTINGTON.  We  have  talked  it  over. 

Senator  MORGAN.  You  are  not  here  for  the  purpose  of  representing 
mere  gossip  among  the  board  of  directors? 

Mr.  HUNTINGTON.  No.    What  I  say  goes  will  go. 

Senator  MORGAN.  Why  do  you  think  it  will  go? 

Mr.  HUNTINGTON.  Because  it  always  has  gone. 

Senator  MORGAN.  Is  it  not  because  you  have  the  controlling  interest 
in  the  corporation  ? 

Mr.  HUNTINGTON.  No;  but  because  they  know  that  I  take  the 
greatest  care  of  the  property.  I  never  had  a  controlling  interest. 

Senator  MORGAN.  What  interest  have  you  in  the  Central  Pacific? 

Mr.  HUNTINGTON.  A  stock  interest. 

Senator  MORGAN.  How  much  stock  interest  do  you  own  in  that 
company  ? 

Mr.  HUNTINGTON.  Not  a  great  deal. 

Senator  MORGAN.  Whether  much  or  little — how  much? 

Mr.  HUNTINGTON.  I  have  not  a  great  deal.  I  may  have — I  do  not 
know;  it  may  be  four  or  five  thousand  shares. 

Senator  MORGAN.  Not  more  than  that? 

Mr.  HUNTINGTON.  Not  more  than  6,000. 

Senator  MORGAN.  And  that  is  left  after  the  six  millions  which  you 
have  disposed  of  to  the  Kentucky  company? 

Mr.  HUNTINGTON.  The  Southern  Pacific  Company  has  no  shares  of 
the  Central  Pacific. 

Senator  MORGAN.  How  many  shares  of  the  Central  Pacific  has  the 
Stanford  estate  got? 

Mr.  HUNTINGTON.  I  do  not  know ;  it  has  got-  considerable. 

Senator  MORGAN.  More  than  you  have  got? 

Mr.  HUNTINGTON.  Oh,  yes. 

Senator  MORGAN.  And  these  four  other  gentlemen  ? 

Mr.  HUNTINGTON.  I  do  not  think  they  have  as  much  as  the  Stanford 
estate. 

Senator  MORGAN.  How  many  shares  of  the  Central  Pacific  are  voted 
in  the  election  of  directors? 
»   Mr.  HUNTINGTON.  Usually  about  two-thirds,  from  60  to  70  per  cent. 

Senator  MORGAN.  Is  that  voted  on  proxies? 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  183 

Mr.  HUNTINGTON.  Largely.  Shareholders  would  hardly  go  to  Cali- 
fornia from  all  over  the  United  States  and  Europe. 

Senator  MORGAN.  Are  these  proxies  bought  or  hired? 

Mr.  HUNTINGDON.  I  never  have  bought  or  hired  any  myself,  and  I 
do  not  think  any  of  our  people  have.  The  work  has  been  done  so  w^ll 
from  start  to  finish  that  the  stockholders  are  very  well  satisfied,  I  think. 

Senator  MORGAN.  Like  the  men  who  in  getting  big  dividends  on 
bank  stock  do  not  think  it  is  their  business  to  investigate  how  the  bank 
is  going  on? 

Mr.  HUNTINGTON.  I  have  not  much  bank  stock. 

Senator  MORGAN.  Do  you,  and  the  estates  which  belong  to  those 
who  are  dead,  control  a  majority  of  the  Central  Pacific  stock  to-day? 

Mr.  HUNTINGTON.  I  do  not  think  we  do. 

Senator  MORGAN.  So  that  you  have  the  power  to  elect  yourselves  to 
office  only  by  proxies'? 

Mr.  HUNTINGTON.  The  stockholders  know  pretty  well  who  are  to  be 
the  board  of  directors.  That  is  generally  understood. 

Senator  MORGAN.  Then  the  election  of  directors  is  merely  pro  forma? 

Mr.  HUNTINGTON.  No;  not  that.  The  stockholders  elect  such  men  as 
suit  them.  If  they  want  a  change  in  the  board  of  directors,  they  can 
have  it. 

Senator  MORGAN.  Has  not  this  road,  from  the  time  it  was  first  built 
till  this  day,  been  practically  under  the  control  of  the  same  men  who 
built  it? 

Mr.  HUNTINGTON.  Yes;  I  think  so.  I  think  they  have  done  more 
than  anyone  else  to  control  the  property. 

Senator  MORGAN.  The  road  has  been  practically,  from  the  beginning 
up  to  date,  under  the  control  of  the  same  set  of  gentlemen  ? 

Mr.  HUNTINGTON.  Yes;  I  should  think  so.  Rotation  in  office  in 
going  properties  of  this  kind  would  not  do.  They  have  to  keep  the 
men  who  are  accustomed  to  the  work  and  who  know  how  to  do  it. 

Senator  MORGAN.  I  call  your  attention  to  day  to  a  statement  made 
here  on  the  authority  of  a  number  of  gentlemen  at  a  great  mass  meet- 
ing held  in  San  Francisco  about  a  year  before  the  meeting  was  held,  at 
which  Mr.  Sutro  and  his  associates  addressed  a  memorial  to  Congress. 
This  statement  is  testified  to  by  James  H.  Barry,  Charles  C.  Terrill,  and 
John  M.  Eeynolds,  a  committee  which  represented  the  meeting  of  citi- 
zens. They  say : 

Onr  railroad  communication  with  other  parts  of  the  Union  has  been  and  is  con- 
trolled by  four  men  (and  their  heirs)  whose  united  fortune  in  1862  did  not  exceed 
half  a  million. 

Is  that  a  fact? 

Mr.  HUNTINGTON.  Do  you  mean  a  fact  about  the  half  a  million? 

Senator  MORGAN.  I  mean  the  whole  statement  [reading  it  again]. 

Mr.  HUNTINGTON.  Well,  there  isn't  any  truth  in  it,  not  in  the  least 
part.  The  Atchison,  Topeka  and  Santa  Fe  Eailroad  connects  with  San 
Francisco  the  same  as  we  do.  They  do  not  run  their  traffic  in  from 
Mojave,  for  the  reason  that  they  can  not  run  it  as  cheap  as  we  do  the 
business  for  them.  That  is,  we  distribute  up  the  business  at  Mojave 
and  one  engine  takes  it  to  San  Francisco.  That  company  is  right  in 
the  market  there,  the  same  as  we  are. 

Senator  MORGAN.  With  all  the  same  advantages? 

Mr.  HUNTINGTON.  I  do  not  know  any  advantages  which  we  have  that 
they  do  not  have.  They  have  a  contract  to  run  over  our  line,  and  they 
have  their  offices  in  San  Francisco,  and  go  for  freight  the  same  as  we 
do. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  You  can  stop  that  whenever  yon  wish  to  I 

Mr.  HUNTINGTON.  No ;  we  have  a  contract  with  them. 

Senator  MORGAN.  But  you  can  stop  the  contract? 

Mr.  HUNTINGTON.  That  would  be  suicidal. 

Senator  MORGAN.  Why  ? 

Mr.  HUNTINGTON.  Because  they  would  run  down  to  Santa  Monica 
with  their  goods,  and  send  them  by  steamer  to  Sau  Francisco  and  put 
them  on  the  Union  Pacific  road,  and  take  them  over  it  to  Chicago. 

Senator  MORGAN.  You  would  not  be  very  much  frightened  by  such 
competition  as  that? 

Mr.  HUNTINGTON.  There  is  no  superior  competition  than  that.  It  is 
shorter  by  water  than  by  rail. 

Senator  MORGAN.  Why  do  they  not  do  that  rather  than  get  you  to 
take  their  cars  on  ? 

Mr.  HUNTINGTON.  It  is  more  convenient  for  them  to  get  their  cars 
taken  on.  We  have  no  advantage  over  them.  If  we  undertook  to  pre- 
vent them  sending  on  their  cars  or  to  refuse  to  give  them  as  good 
accommodations  as  we  have,  they  would  do  what  I  say. 

Senator  MORGAN.  Here  is  a  statement  which  they  make,  but  it  is 
rather  a  piece  of  declamation  than  a  statement  of  facts. 

Mr.  HUNTINGTON.  It  is  just  as  good  as  any  other  statement  they 
make. 

Senator  MORGAN.  Not  quite.    They  say : 

These  men  were  lavishly  endowed  by  the  people  in  their  municipal,  State,  and 
Federal  capacities,  with  laud  and  money  aggregating  quadruple  the  cost  of  building 
the  said  roads.  They  have  drained  our  people  of  every  dollar  they  could  extract 
by  excess! ve  freights  and  fares;  they  have  through  the  power  thus  given  them 
entrenched  their  own  monopoly  and  established  and  made  monopolies  subservient 
to  their  interests;  they  have  obstructed  the  development  of  the  State,  and  by  the 
addition  of  extortion  and  fraud  have  accumulated  the  unprecedented  sum  of  fully  two 
hundred  millions  of  capital. 

Mr.  HUNTINGTON.  That  is  all  a  lie,  and  if  they  had  not  known  it  to 
be  a  lie  they  would  not  have  written  it. 

Senator  MORGAN.  These  men  say  that  they  represent  thousands  and 
thousands  of  people. 

Mr.  HUNTINGTON.  The  only  thing  that  surprises  me  is  that  they  do 
not  say  they  represent  millions  and  millions. 

Senator  MORGAN.  Do  you  know  these  three  men,  Barry,  Terrill,  and 
Beynolds? 

Mr.  HUNTINGTON.  No ;  but  I  know  the  strain  about  poor  Dog  Tray 
who  had  been  in  company  with  bad  dogs. 

Senator  MORGAN.  They  say  that,  at  that  public  meeting,  not  less 
than  15,000  people  were  turned  away  who  could  not  gain  admission  to 
the  Metropolitan  Temple. 

Mr.  HUNTINGTON.  Oh,  there  were  no  15,000  or  1,500  people  there. 
I  wish  you  would  read  that  paragraph  again;  it  is  interesting. 

Senator  Morgan  again  read  the  paragraph  commencing,  u These  men 
were  lavishly  endowed  by  the  people,"  and  he  asked  Mr.  Huntiugton 
whether  that  was  true. 

Mr.  HUNTINGTON.  That  is  a  lie. 

Senator  MORGAN.  How  wide  is  the  lie? 

Mr.  HUNTINGTON.  They  do  not  know  anything  about  it. 

Senator  MORGAN.  Give  your  statement  about  it.  What  is  your 
statement? 

Mr.  HUNTINGTON.  Let  me  take  the  book.  [After  getting  the  book 
and  reading  the  paragraph  beginning  "These  men  were  lavishly  endowed 
by  the  people."] 

Senator  MORGAN  said :  That  is  the  statement  which  you  say  is  a  lie? 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  185 

Mr.  HUNTINGTON.  I  do,  decidedly;  and  if  it  were  not  a  lie  these  men 
would  not  have  written  it.  That  is  my  opinion. 

Senator  MORGAN.  Can  you  give  an  approximate  statement  of  how 
much  the  people  have  endowed  you  with,  so  that  we  can  see  how  broad 
a  lie  these  men  have  been  telling? 

Mr.  HUNTINGTON.  The  city  of  San  Francisco  gave  us  $400,000.  The 
State  of  California  paid  the  interest  on  a  million  aud  a  half  of  our  bonds 
for  twenty  years.  I  do  not  think  of  anything  else  they  did  for  us  that 
has  been  of  any  use.  They  gave  us  the  right  to  go  on  the  levee  at  Sac- 
ramento, but  we  went  off  from  there  and  went  on  the  other  side  of  the 
slough.  That  levee  was  free  to  anybody  there.  They  gave  us  30  acres 
of  land  in  Mission  Bay,  San  Francisco,  but  we  never  have  got  the  inter- 
est on  the  money  that  it  cost  us  to  fill  it  up,  from  that  day  to  this.  And 
that  is  what  these  men  put  down  at  $40,000,000.  I  do  not  know  any- 
thing that  we  got  from  the  State  of  California,  except  that  the  State 
paid  the  interest  for  twenty  years  on  a  million  and  a  half  of  our  bonds. 
The  city  of  San  Francisco  gave  us  $400,000  in  bonds.  I  sold  those 
bonds  in  the  East  in  the  neighborhood  of  par,  and  they  would  not  have 
brought  over  60  cents  in  gold.  That  is  $240,000.  The  State  paid  the 
interest  on  a  million  and  a  half  of  our  bonds  for  twenty  years.  And  I 
know  well  enough  that  that  road  cost  us  something  about  eighty  or 
ninety  million  dollars.  I  am  talking  now  about  what  I  know. 

Senator  MORGAN.  I  thought  you  were  doing  that  all  the  time.  Have 
the  charges  on  freights  that  you  have  been  making  on  the  goods  to  the 
East  or  West  been  excessive? 

Mr.  HUNTINGTON.  The  people  of  New  Jersey  and  of  Delaware  com- 
plain that  the  prices  we  make  on  fruit  from  California  to  New  York  are 
so  low  that  they  can  not  compete  with  the  California  fruit  raisers;  that 
answers  that  part  of  the  charge.  Last  year  our  charge  for  freight  was 
less  than  12  mills  a  ton  a  mile.  We  began  with  over  2  cents  a  mile. 
When  we  built  the  road  through  the  San  Joaquin  Valley,  land  there  was 
offered  to  me  at  $1.25  an  acre  which  has  been  selling  since  the  road  has 
been  built  at  from  $10  to  $100  an  acre.  Does  that  look  like  injuring  the 
farmer?  Up  the  Salinas  Valley  we  built  200  miles  of  road.  There  was 
an  estate  of  40,000  acres  there  which  we  could  have  bought  at  $5  an 
acre,  but  when  the  road  was  built  one  part  of  that  farm  was  sold  at  $40 
an  acre,  and  another  part  at  $25  an  acre.  Mr.  Althorpe  told  mehe  would 
sell  me  a  farm  on  the  Soledad  at  $2.50  an  acre — some  20,000  acres.  The 
next  time  I  went  back  there,  we  had  crossed  the  Calendario  Creek,  and 
he  oifered  it  to  Mr.  Stanford  at  $5  a  acre.  I  asked  Stanford  to  buy  it, 
as  it  was  beautiful  land,  but  he  would  not.  The  next  time  I  was  there 
the  governor  had  not  bought  the  land,  and  when  we  had  crossed  the 
Elkhorn  Slough  he  asked  Althorpe  what  he  would  sell  the  land  for,  and 
he  said  $40  an  acre.  That  is  the  way  we  served  the  farmers  of  Cali- 
fornia, and  they  do  not  complain  when  we  move  tonnage  for  less  than 
12  mills  a  ton  per  mile  and  passengers  at  less  than  2  cents  a  mile.  The 
trouble  is  with  these  fellows  they  have  got  nothing  oat  of  us  and  they 
will  not  unless  they  work  for  it.  They  have  been  discharged  employees. 

Senator  MORGAN.  Any  of  these  three? 

Mr.  HUNTINGTON.  I  do  not  know  them  at  all.  All  of  these  things  I 
know.  There  is  no  guesswork  about  it. 

Senator  MORGAN.  I  suppose  you  know  that  the  farmers  and  all  busi- 
ness men  of  California  have  made  the  same  complaint,  that  the  arrange- 
ment which  you  made  with  the  Panama  Railroad  and  Steamship 
Company  running  from  San  Francisco  to  the  coast,  by  which  you 
bought  space  in  those  ships,  worked  to  their  injury! 


186  GOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  never  heard  of  their  making  any  complaint. 

Senator  MORGAN.  They  had  a  right  to  make  a  complaint. 

Mr.  HUNTINGTON.  I  suppose  they  had  a  right  if  they  wished. 

Senator  MORGAN.  They  had  a  just  right  to  complain. 

Mr.  HUNTINGTON.  No;  it  was  done  merely  to  conserve  the  property 
and  to  get  something  out  of  the  road. 

Senator  MORGAN.  Was  not  the  effect  of  it  to  cut  these  people  off 
from  the  steamboat  business  which  you  monopolized? 

Mr.  HUNTINGTON.  No;  we  gave  lower  prices  than  they  had  been 
paying. 

Senator  MORGAN.  Then,  according  to  your  statement,  there  was  very 
little  use  in  making  this  monopolistic  arrangement  and  paying  this 
enormous  sum  to  the  steamship  company  in  order  to  get  the  haul? 

Mr.  HUNTINGTON.  I  did  not  control  the  Panama  line  then.  I  did 
not  have  an  interest  in  it.  It  was  a  legitimate  thing— such  a  thing  as 
is  done  all  the  time.  Everybody  who  travels  in  western  Europe  knows 
that  the  railroad  rates  there  are  very  much  higher  than  they  are  here, 
although  everything  else  is  so  cheap  there.  Although  between  Liver- 
pool and  London  the  population  is  so  dense  that  you  can  hardly  get 
out  of  sight  of  a  great  smokestack,  I  paid  $7.50  railroad  fare  from 
Liverpool  to  London,  198  miles,  one  of  these  points  being  a  city  of 
5,000,000  and  the  other  a  city  of  1,000,000  inhabitants. 

Senator  MORGAN.  Did  you  ever  admit  freight  to  be  carried  between 
San  Francisco  and  Panama  in  the  steamers  or  the  ships  in  which  you 
bought  a  space  at  a  lower  rate  than  was  paid  on  the  railway  ? 

Mr.  HUNTINGTON.  We  always  made  a  difference. 

Senator  MORGAN.  Did  you  in  the  first  instance1? 

Mr.  HUNTINGTON.  Always. 

Senator  MORGAN.  What  was  the  difference  in  the  rates? 

Mr.  HUNTINGTON.  The  difference  now,  I  think,  is  75  cents  and  00 
cents  on  the  dollar. 

Senator  MORGAN.  I  am  talking  of  the  space  that  you  bought  in  those 
steamships,  for  which  you  paid  how  much? 

Mr.  HUNTINGTON.  We  paid,  I  think,  $6  a  ton. 

Senator  MORGAN.  How  much  a  month,  or  by  the  year? 

Mr.  HUNTINGTON.  Seventy-five  thousand  dollars  a  month. 

Senator  MORGAN.  For  space  in  those  steamships  between  Panama 
and  San  Francisco? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  admit  the  freights  of  the  people  into  that 
space  at  rates  as  low  as  you  charged  on  your  railroad? 

Mr.  HUNTINGTON.  Lower. 

Senator  MORGAN.  Why  did  you  do  that? 

Mr.  HUNTINGTON.  Because  there  is  a  differential.  There  is  insur- 
ance and  delay  and  other  things,  so  that  if  there  was  not  a  differential 
no  one  would  ship  goods  in  that  way. 

Senator  MORGAN.  Then  the  advantage  in  favor  of  steamship  lines  is 
a  very  decided  one  to  the  people,  according  to  your  statement? 

Mr.  HUNTINGTON.  Please  state  that  again. 

Senator  MORGAN.  The  advantages  in  favor  of  the  people  who  pro- 
duce on  the  Pacific  Coast,  and  who  have  to  seek  a  market  abroad,  on 
those  commodities  which  will  bear  sea  transportation  must  be  very 
great  if  the  freight  is  lower  than  by  the  railroads  and  if  the  differ- 
entials are  in  their  favor. 

Mr.  HUNTINGTON.  The  freights  must  be  less  by  the  steamship  lines 
than  by  all  rail,  otherwise  people  would  not  ship  by  them,  of  course, 
because  there  is  a  certain  risk  and  a  certain  length  of  time  consumedi 


GOVERNMENT   DEBT   OF   THE   PACIFIC    RAILROADS.  187 

Senator  MORGAN.  If  you  permitted  the  people  of  California  to  ship 
their  goods  in  the  space  you  had  bought  at  $75,000  a  month,  I  can  not 
see  why  you  should  make  such  an  arrangement  as  that,  when  even  then 
the  people  could  take  that  space  and  ship  in  it  on  lower  rates  than  they 
could  on  your  railroads. 

Mr.  HUNTINGTON.  There  is  always  a  differential  in  favor  of  the  rail- 
roads. Take  the  Pennsylvania  road  and  the  New  York  Central,  and 
they  have  a  differential  in  their  favor.  I  do  not  think  any  other  roads 
would  get  so  much. 

Senator  MORGAN.  Was  it  not  a  fact  that  those  steamers  went  prac- 
tically empty  ? 

Mr.  HUNTINGTON.  Oh,  no. 

Senator  MORGAN.  On  this  space  that  you  paid  for,  did  they  go  fully 
freighted? 

Mr.  HUNTINGTON.  I  do  not  know  that  they  always  did.  The  spirit 
of  the  arrangement  was  to  fill  all  the  space. 

Senator  MORGAN.  I  can  not  understand  why  you  made  the  arrange- 
ment. 

Mr.  HUNTINGTON.  We  had  made  rates  to  New  York,  and  some 
companies  cut  those  rates.  One  concern  that  failed  last  year  had  seven 
millions  of  unpaid  rebates.  We  wanted  to  avoid  all  that,  but  that 
could  not  be  done  altogether.  Mr.  Thurber,  I  think,  said  that  one- 
third  of  all  the  railroads  of  the  country  were  in  bankruptcy,  caused 
largely  by  secret  rebates. 

Senator  MORGAN.  And  your  purpose  was  to  prevent  other  roads 
cutting  rates1? 

Mr.  HUNTINGTON.  It  was  to  get  a  uniform  rate  of  freight  fair  to  the 
shipper  and  fair  to  the  transportation  companies. 

Senator  MORGAN.  And  to  prevent  other  roads  from  cutting? 

Mr.  HUNTINGTON.  That  is  the  result. 

Senator  MORGAN.  What  roads  were  in  the  arrangement? 

Mr.  HUNTINGTON.  I  do  not  think  I  could  call  them  all — the  Cana- 
dian Pacific,  the  Great  Northern,  the  Northern  Pacific,  the  Union 
Pacific,  the  Southern  Pacific,  the  Central  Pacific,  and  the  Atchison, 
Topeka  and  Santa  Fe. 

Senator  MORGAN.  So  that  you  were  practically  protecting  yourselves 
against  a  railroad  war  of  rate  cutting  against  all  of  those  roads? 

Mr.  HUNTINGTON.  We  have  to  do  that. 

Senator  MORGAN.  I  want  to  know  why  you  did  it. 

Mr.  HUNTINGTON.  We  did  it  so  as  not  to  have  our  property  wasted 
and  not  to  have  to  go  into  bankruptcy;  that  is  what  we  did  it  for.  If 
we  could  have  always  trusted  companies  to  agree  upon  rates  and  to 
observe  them  we  would  do  so. 

Senator  MORGAN.  Did  you  succeed  in  breaking  up  this  cutting  of 
rates  ? 

Mr.  HUNTINGTON.  No;  I  see  that  one  railroad  company  has  over 
seven  millions  of  unpaid  rebates  out. 

Senator  MORGAN.  What  company  is  that? 

Mr.  HUNTINGTON.  The  Atchison,  Topeka  and  Santa  Fe. 

Senator  MORGAN.  Then  you  did  not  succeed,  even  after  paying  this 
$75,000  a  month,  in  keeping  rates  up? 

Mr.  HUNTINGTON.  That  arrangement  did  not  run  very  long  before 
the  railroads  gave  notice  to  quit. 

Senator  MORGAN.  How  long  did  it  run? 

Mr.  HUNTINGTON.  About  three  years,  I  think. 

Senator  MORGAN.  You  do  not  think  it  was  more  than  that? 


188  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  No;  it  was  about  three  years,  perhaps  a  little 
more  than  that. 

Senator  MORGAN.  Where  is  the  contract  under  which  that  agreement 
was  made? 

Mr.  Huntington  produced  the  contract,  as  follows: 

This  agreement,  between  the  Transcontinental  Association,  an  association  consist- 
ing of  the  following  railroad  companies,  namely,  the  Southern  Pacific  Company; 
the  Atchisou,  Topeka  and  Santa  Fe  Railroad  Company;  the  Atlantic  and  Pacific 
Railroad  Company ;  the  California  Central  Railway  Company ;  the  California  Southern 
Railroad  Company;  the  Burlington  and  Missouri  River  Railroad  Company;  the 
Denver  and  Rio  Grande  Railway  Company ;  the  Denver  and  Rio  Grande  Western 
Railway  Company;  the  Northern  Pacific  Railroad  Company;  the  Oregon  Railway 
and  Navigation  Company ;  the  Missouri  Pacific  Railway  Company ;  the  Texas  and 
Pacific  Railway  Company;  the  Oregon  Short  Line  Railway  Company;  the  Union 
Pacific  Railway  Company;  the  St.  Louis  and  San  Francisco  Railroad  Company;  the 
Chicago,  Kansas  and  Nebraska  Railway;  Denver,  Texas  and  Fort  Worth  Railroad, 
and  the  St.  Paul,  Minneapolis  and  Manitoba  Railway  Company,  which  association 
is  now  represented  by  James  Smith,  its  chairman,  party  of  the  first  part,  and  the 
Pacific  Mail  Steamship  Co.,  a  corporation  created  by  and  existing  under  the  laws  of 
the  State  of  New  York,  party  of  the  second  part,  made  and  entered  into  this  first 
day  of  October,  1889,  wituesseth : 

First.  That  the  said  party  of  the  first  part,  in  consideration  of  the  undertakings 
and  agreements  of  the  said  steamship  company  hereinafter  contained,  undertakes, 
promises,  and  agrees  to  and  with  said  steamship  company,  to  guarantee,  and  does 
hereby  guarantee,  that  the  gross  earnings  upon  through  freight  and  passengers 
between  New  York  and  San  Francisco  to  be  provided  to  said  steamship  company  by 
said  party  of  the  first  part  shall  be  seventy-five  thousand  ($75,000)  dollars  per  month. 
All  the  gross  earnings  of  said  steamers  from  through  business  between  New  York 
and  San  Francisco  each  way  shall  go  to  and  belong  and  be  payable  to  said  party  of 
the  first  part  or  credited  upon  its  said  guarantee  to  said  steamship  company. 

Second.  In  consideration  of  said  guaranty,  of  said  party  of  the  first  part,  the  said 
Pacific  Mail  Steamship  Company  covenants,  promises,  and  agrees  to  and  with  thfc 
said  party  of  the  first  part  that  it,  the  said  steamship  company,  will,  at  its  own  cost, 
and  expense,  dispatch  and  run  from  the  port  of  New  York  for  Aspinwall  not  morft 
than  three  nor  less  than  two  through  steamers  per  month,  and  not  more  than  three 
nor  less  than  two  steamers  connecting  therewith  from  Panama  to  San  Francisco, 
and  from  the  port  of  San  Francisco  for  Panama  not  more  than  three  nor  less  than 
two  through  steamers  per  month,  and  not  more  than  three  nor  less  than  two  steamers 
connecting  therewith  from  Aspinwall  to  New  York,  and  that  said  steamship  company 
will  permit  said  party  of  the  first  part  to  fix  the  rates  at  which  all  through  freight 
between  New  York  and  San  Francisco  and  all  passengers  shall  be  transported  by 
the  vessels  of  the  steamship  company  from  the  port  of  New  York  to  the  port  of  San 
Francisco,  and  from  the  port  of  San  Francisco  to  the  port  of  New  York,  and  will 
furnish  room  on  each  of  said  steamer«j  from  New  York  and  San  Francisco,  respec- 
tively, and  their  connecting  steamers  for  the  transportation  of,  and  will  transport 
from  New  York  to  San  Francisco  and  from  San  Francisco  to  New  York  all  and  only 
such  passengers  and  such  freight  as  may  be  obtained  under  rates  fixed  by  said  party 
of  the  first  part,  to  an  amount  as  to  freight  not  exceeding  six  hundred  tons  of  two 
thousand  pounds  each,  in  case  it  runs  two  steamers  per  mouth,  and  four  hundred 
tons,  in  case  it  runs  three  steamers  per  month,  upon  any  one  steamer,  it  being 
understood  that  the  deficiency  of  excess  of  said  six  hundred  tons  or  said  four  hun- 
dred tons,  respectively,  of  cargo  upon  any  one  steamer  may  be  added  to  or  taken 
from,  as  the  case  may  be,  the  cargo  of  any  other  vessel  sailing  in  same  direction 
•within  the  same  calendar  month,  the  intent  being  that  the  steamship  company  shall 
carry  monthly  an  average  of  six;  hundred  tons  per  vessel  in  case  two  steamers  per 
month  are  run,  or  a  monthly  average  of  four  hundred  tons  per  vessel  in  case  three 
steamers  per  month  are  run. 

All  above  steamers  to  be  first  class  and  equal  to  those  now  maintained,  and  in  case 
of  the  loss  of  a  steamer  or  its  withdrawal  for  any  cause,  the  Pacific  Mail  Steamship 
Company  shall  as  soon  as  possible  furnish  a  steamer  of  equal  capacity  and  rating. 
In  the  event  of  failure  on  the  part  of  said  steamship  company  to  furnish  proper  and 
adequate  facilities  for  the  transportation  of  at  least  one  thousand  two  hundred  tons 
of  freight  each  way  per  month,  at  the  rate  of  at  least  four  hundred  tons  per  vessel, 
then  the  guaranty  herein  provided  for  shall  be  reduced  pro  rata. 

The  steamship  company  is  to  bear  and  pay  all  the  expenses  and  charges  of  every 
kind  of  transporting  such  goods,  passengers,  and  freight  from  New  York  to  San 
Francisco  and  from  San  Francisco  to  New  York,  including  all  charges  and  expenses 
of  every  kind  in  the  ports  of  New  York  and  San  Francisco,  and  all  supplies  of  pas- 
sengers with  food  and  sleeping  accommodation,  giving  them  proper  accommodation 


GOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS.  189 

*1 

according  to  class,  and  to  continue  to  use  all  efforts  to  obtain  first  class  and  other 
passengers  as  heretofore. 

Third.  The  understanding  and  intention  of  this  agreement  is,  that  the  party  of  the 
first  part  shall,  through  agents  appointed  by  itself,  have  entire  and  exclusive  control 
of  all  the  through  business  of  the  said  steamship  company  between  New  York  and  San. 
Francisco  each  way,  and  that  no  through  freight  or  passengers  shall  be  taken  except 
at  prices  to  be  fixed  by  the  party  of  the  first  part  and  by  its  consent,  it  being  under- 
stood that  said  control  shall  be  exercised  through  the  established  agencies  of  said 
steamship  company.  If  the  said  steamship  company  shall  have  room  or  capacity  for 
more  than  six  hundred  tons,  in  the  event  of  its  running  two  steamers  per  month 
each  way,  or  for  more  than  four  hundred  tons,  in  the  event  of  its  running  three 
steamers  per  month  each  way,  of  through  freight  on  any  steamer,  and  the  party  of 
the  first  part  shall  desire  to  fill  it,  the  said  party  of  the  first  part  shall  be  at  liberty 
to  do  so  at  rates  fixed  jointly  by  duly  authorized  representatives  of  the  parties 
hereto,  the  party  of  the  first  part  to  have  one-half  of  the  freights  on  such  excess  and 
the  steamship  company  the  other  half. 

Fourth.  The  Pacific  Mail  Steamship  Company  shall  render  to  the  party  of  the  first 
part  an  account  or  statement  of  the  transactions  for  through  business  of  each  month 
on  or  before  the  tenth  day  of  the  succeeding  month,  showing  the  amount  claimed  to 
be  due  from  the  party  of  the  first  part  under  this  agreement,  and  on  or  before  the 
thirtieth  day  of  the  succeeding  month  the  chairman  of  (the  party  of  the  first  part 
shall  draw  his  draft  in  favor  of  the  Pacific  Mail  Steamship  Company  upon  each  of 
the  railroad  companies  constituting  the  party  of  the  first  part  for  the  portion  pay- 
able by  it  to  said  steamship  company  on  account  of  the  aggregate  amount  payable 
by  the  party  of  the  first  part  to  the  said  steamship  company  according  to  the  fore- 
going provisions  hereof.  The  portions  of  such  aggregate  amount  payable  from  time 
to  time  by  the  respective  companies  forming  the  party  of  the  first  part  shall  be  such 
as  has  been  or  may  be  fixed  or  prescribed  among  themselves ;  and  each  of  the  said 
companies  forming  the  party  of  the  first  part  shall  be  liable  for  its  own  portion  of 
such  aggregate  amount,  but  none  of  such  companies  shall  be  liable  for  the  portion 
payable  by  the  others  or  any  other  of  such  companies. 

Provided,  nevertheless,  that  in  the  event  of  default  in  payment  by  any  one  or  more 
of  the  companies  constituting  the  party  of  the  first  part  of  its  proportion  herein 
provided  for,  it  shall  be  optional  with  the  party  of  the  second  part  to  terminate  this 
agreement  on  giving  ten  days'  notice  to  the  party  of  the  first  part  through  its 
chairman. 

The  party  of  the  first  part,  or  any  other  companies  constituting  the  same,  may,  at 
any  time  on  demand,  examine  the  books  and  accounts  of  the  said  steamship  company 
for  the  purpose  of  obtaining  full  details  as  to  freight  and  passengers  transported  by 
said  steamship  company  under  this  agreement  and  verifying  the  accounts  and  state- 
ments of  the  steamship  company. 

Fifth.  It  is  mutually  understood  and  agreed  that  this  contract  shall  be  deemed  to 
have  commenced  on  the  first  day  of  October,  1889,  and  to  include  the  earnings  from 
through  business  on  steamers  sailing  on  and  after  that  date,  and  as  to  each  and  all  of 
the  foregoing  provisions  shall  continue  in  force  thereafter  until  ninety  days  after 
written  notice  oi  the  intention  to  terminate  the  same  fchall  have  been  given  by  either 
party  to  the  other,  with  this  exception,  that  if  the  exclusive  contract  between  the 
said  steamship  company  and  the  Panama  Railroad  Company,  so  far  as  it  refers  to  the 
business  of  the  steamship  company  between  San  Francisco  and  New  York,  is  broken 
or  changed  in  any  respect,  or  if  any  other  competing  line  by  rail  or  vessel  shall  be 
established  between  the  waters  of  the  Atlantic  and  Pacific  Oceans,  either  overland 
or  via  the  Isthmus  of  Panama,  that  shall  affect  the  through  business,  concerning 
which  this  agreement  is  made,  then  the  said  party  of  the  first  part  may  abrogate  and 
terminate  this  agreement  at  any  time  or  not,  as  it  may  elect. 

Sixth.  In  regard  to  the  freight  and  passengers  received  by  the  steamship  company 
at  San  Francisco,  for  transportation  to  Europe  via  Panama,  it  is  understood  that  the 
class  of  business  to  be  taken  and  the  rates  to  be  charged  thereon  shall  be  the  subject 
of  conference  and  mutual  agreement  between  the  San  Francisco  agency  of  the  Pacific 
Mail  Steamship  Company  and  the  San  Francisco  general  agent  of  the  party  of  the 
first  part  to  the  end  that  the  interests  of  both  parties  may  be  fully  protected. 

In  witness  whereof  the  party  of  the  first  part  has  subscribed  its  name  hereto  by 
its  chairman,  and  the  said  steamship  company  has  caused  its  corporate  seal  to  be 
hereto  annexed,  attested  by  its  secretary,  and  its  name  to  be  signed  hereto  by  its 
president,  the  day  and  year  first  above  written. 

[SEAL.]  JAMES  SMITH, 

Chairman  Transcontinental  Association. 

GEORGE  J.  GOULD, 
President  Pacific  Mail  /Steamship  Company. 

Attest : 

Jos.  HELLTCN, 

Secretary  pro  tern. 


1<JO  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  I  see  that  it  is  signed  by  James  Smith,  chairman 
Transcontinental  Association,  on  the  one  part,  and  George  J.  Gould, 
president  Pacific  Mail  Steamship  Company,  on  the  other  part. 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Your  guaranty  appears  to  be  that  the  gross  earn- 
ings upon  through  freight  and  passengers  between  New  York  and  San 
Francisco  to  be  provided  to  this  steamship  company  by  the  railroad 
companies  shall  be  $75,000  per  month.  These  railroad  companies  con- 
stituted the  Transcontinental  Association? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN  (reading  from  the  contract) : 

All  the  gross  earnings  of  said  steamers  from  through  business  between  New  York 
and  San  Francisco  each  way  shall  go  to  and  belong  and  be  payable  to  said  party  of 
the  first  part  or  credited  upon  its  said  guaranty  to  said  steamship  company.  In  con- 
sideration of  said  guaranty  of  said  party  of  the  first  part,  the  said  Pacific  Mail 
Steamship  Company  promises  and  agrees  that  it  will,  at  its  own  cost  and  expense, 
dispatch  and  run  from  the  port  of  New  York  for  Aspinwall  not  more  than  three  nor 
less  than  two  through  steamers  per  month,  and  not  more  than  three  nor  less  than  two 
steamers  connecting  therewith  from  Panama  to  San  Francisco,  and  from  the  port  of 
San  Francisco  or  Panama  not  more  than  three  nor  less  than  two  through  steamers  per 
mouth,  and  not  more  than  three  nor  less  than  two  steamers  connecting  therewith 
from  Aspinwall  to  New  York,  and  that  said  steamship  company  will  permit  said  party 
of  the  first  part  to  fix  the  rates  at  which  all  their  freight  between  New  York  and  San 
Francisco  and  of  passengers  shall  be  transported  by  the  vessels  of  the  steamship 
company  from  the  port  of  New  York  to  San  Francisco,  and  from  the  port  of  San 
Francisco  to  the  port  of  New  York,  and  will  furnish  room  on  each  of  said  steamers 
from  New  York  and  San  Francisco,  respectively,  and  their  connecting  steamers  for  the 
transportation  of  and  will  transport  from  New  York  to  San  Francisco  and  from  San 
Francisco  to  New  York  all  and  only  such  passengers  and  such  freight  as  may  be 
obtained  under  rates  fixed  by  said  party  of  the  first  part  to  an  amount  as  to  freight 
not  exceeding  600  tons  of  2,000  pounds  each  in  case  it  runs  two  steamers  per  mouth, 
and  400  tons  in  case  it  runs  three  steamers  per  month  upon  any  one  steamer,  the  intent 
being  *  *  *  that  the  steamship  company  shall  carry  monthly  an  average  of  600 
tons  per  vessel  in  case  two  steamers  per  month  are  run  or  a  monthly  average  of  400 
tons  per  vessel  in  case  three  steamers  per  month  are  run. 

**##**• 

The  understanding  and  intention  of  this  agreement  is  that  the  party  of  the  first 
part  shall,  through  agents  appointed  by  itself,  have  entire  and  exclusive  control  of 
all  the  other  business  of  the  said  steamship  company  between  New  York  and  San 
Francisco  each  way,  and  that  no  through  freight  or  passengers  shall  be  taken  except 
at  prices  to  be  fixed  by  the  party  of  the  first  part  and  by  its  consent,  it  being  under- 
stood that  said  control  shall  be  exercised  through  the  established  agencies  of  said 
steamship  company. 

Now,  Mr.  Huntington,  without  going  through  this  paper,  it  appears 
to  be  a  contract  under  which  the  party  of  the  first  part,  representing 
several  railroad  companies,  has  a  right  to  fix  the  freight  upon  a  certain 
amount  of  tonnage  on  each  of  those  vessels? 

Mr.  HUNTINGTON.  Yes;  that  is  it. 

Senator  MORGAN.  Which  was  the  largest  amount — occupying  nearly 
the  entire  carrying  capacity  of  the  ship.  The  object  of  that  was  to  be 
enabled,  in  competition  with  those  steamships,  to  keep  up  the  rate  of 
charges  on  your  railroads  and  on  the  railroads  represented  in  this  agree- 
ment without  cutting. 

Mr.  HUNTINGTON.  Yes;  the  object  was  to  make  us  able  to  get  pay- 
ing rates. 

Senator  MORGAN.  And  this  arrangement  between  the  railroad  com- 
panies represented  by  Mr.  Smith,  and  the  steamship  company  repre- 
sented by  Mr.  Gould,  put  it  in  the  power  of  Mr.  Smith  and  of  the  roads 
he  represented  to  fix  the  rate  of  freights  both  on  the  steamship  line 
and  on  the  overland  lines  to  any  figure  they  saw  proper? 

Mr.  HUNTINGTON.  Any  price  that  was  fair  and  right. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  191 

Senator  MORGAN.  He  was  not  controlled  in  any  way  by  that  consid- 
eration. 

Mr.  HUNTINGTON.  We  could  not  raise  the  rates  upon  grain  tonnage, 
which  is  a  low-priced  tonnage,  and  which  goes  around  Cape  Horn. 

Senator  MORGAN.  It  goes  that  way  now? 

Mr.  HUNTINGTON.  Yes;  tonnage  where  the  cost  per  pound  is  small. 

Senator  MORGAN.  Was  not  the  effect  of  this  arrangement  to  put  all 
the  freight  south  of  San  Francisco,  going  and  coming,  under  the  control 
of  these  particular  railroads  ? 

Mr.  HUNTINGTON.  It  extended  over  the  whole  coast.  The  Northern 
Pacific  reached  Seattle,  the  Union  Pacific  reached  Portland,  the  Oregon 
and  California  reached  Tehama  Bay,  and  the  Atchison  and  Topeka  ran 
to  San  Diego. 

Senator  MORGAN.  How  did  it  happen  that  this  combination  of  rail- 
roads and  steamship  lines  found  it  expedient  to  abandon  their  contract? 

Mr.  HUNTINGTON.  I  suppose  it  was  on  account  of  the  cutting  of 
rates.  That  is  why  these  agreements  have  always  gone  up. 

Senator  MORGAN.  Cutting  of  rates  by  whom? 

Mr.  HUNTINGTON.  By  some  of  the  railroad  lines. 

Senator  MORGAN.  Not  by  some  of  those  included  in  the  agreement? 

Mr.  HUNTINGTON.  I  think  so.  If  they  had  all  agreed  upon  a  fair 
rate,  and  had  all  held  to  it,  it  was  a  very  fair  and  proper  thing  to  have 
done.  I  did  not  have  much  to  do  with  the  making  of  that  agreement. 

Senator  MORGAN.  The  companies  that  came  into  the  agreement — 
some  of  them — broke  away  from  it? 

Mr.  HUNTINGTON.  I  assume  that,  because  notice  was  given  to  with- 
draw from  the  agreement. 

Senator  MORGAN.  The  withdrawal  was  not  caused  by  competition 
from  the  Canadian  railroads  or  from  the  Northern  Pacific? 

Mr.  HUNTINGTON.  No;  the  Northern  Pacific  was  in  the  agreement, 
and  I  think  the  Canadian  Pacific  was  in  it. 

Senator  MORGAN.  Then  it  was  not  competition  from  that  quarter? 

Mr.  HUNTINGTON.  It  may  have  been.  There  was  a  screw  loose  some 
where. 

Senator  MORGAN.  It  was  not  the  competition  from  the  companies 
that  were  outside  of  the  agreement,  but  from  those  that  were  inside, 
that  caused  you  to  have  to  break  it  up  ? 

Mr.  HUNTINGTON.  I  should  say  so. 

Senator  MORGAN.  Did  the  Panama  Eailroad  have  anything  to  do 
with  causing  you  to  throw  up  this  agreement? 

Mr.  HUNTINGTON.  I  think  not. 

Senator  MORGAN.  Did  not  that  railroad  company  raise  the  rates  for 
transportation  across  the  Isthmus? 

Mr.  HUNTINGTON.    The  Isthmus  rates  we  had  nothing  to  do  with. 

Senator  MORGAN.  Did  not  the  Panama  Company  notify  you,  or  notify 
Mr.  Smith,  that  it  would  no  longer  be  bound  by  that  agreement? 

Mr.  HUNTINGTON.  I  think  not. 

Senator  MORGAN.  And  that  they  would  levy  their  usual  charges? 

Mr.  HUNTINGTON.  I  think  not. 

Senator  MORGAN.  And  was  not  the  result  of  it  that  you  had  a  law 
suit  in  New  York  about  it? 

Mr.  HUNTINGTON.  No;  we  never  had  a  lawsuit  about  it. 

Senator  MORGAN.  Was  not  a  suit  in  contemplation? 

Mr.  HUNTINGTON.  That  was  on  an  old  contract  of  3872;  not  for  San 
Francisco  business  at  all,  but  on  the  west  coast  of  the  coast  of  Mexico 
and  with  the  small  republics  south  of  it, 


192  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  That  was  a  different  contract? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  long  did  that  1872  contract  run? 

Mr.  HUNTINGTON.  I  think  it  ran  some  twenty  years. 

Senator  MORGAN.  Who  had  that  contract? 

Mr.  HUNTINGTON.  It  was  between  the  Pacific  Mail  Steamship  Com- 
pany, by  Col.  W.  Park,  I  think,  on  the  one  side,  and  the  Panama  Rail- 
road Company  on  the  other.  I  do  not  know  who  its  president  was. 

Senator  MORGAN.  Was  the  Central  Pacific  interested  in  that  con- 
tract which  ran  for  nearly  twenty  years  ? 

Mr.  HUNTINGTON.  No;  none  of  the  Pacific  roads  had  anything  to  do 
with  it.  - 

Senator  MORGAN.  That  was  a  contract  for  the  purpose  of  keeping 
down  competition? 

Mr.  HUNTINGTON.  Not  between  San  Francisco  and  New  York.  As 
I  remember,  they  gave  a  certain  price  over  the  isthmus — a  certain  price 
per  month. 

Senator  MORGAN.  So  that  neither  the  Central  Pacific  or  the  Southern 
Pacific  had  any  connection  with  that  agreement? 

Mr.  HUNTINGTON.  Not  at  all.  It  was  before  the  Southern  Pacific 
was  commenced.  It  was  in  1872. 

Senator  MORGAN.  Did  you  make  your  money  back  which  you  paid 
to  this  steamship  company,  $75,000  a  month? 

Mr.  HUNTINGTON.  I  suppose  so. 

Senator  MORGAN.  You  heard  no  complaint  about  not  making  it  back  ? 

Mr.  HUNTINGTON.  I  never  heard  any.  It  seemed  a  proper  thing  to 
do  to  get  fair  rates. 

Senator  MORGAN.  How  much  money,  in  the  aggregate,  was  paid  to 
this  steamship  company  presided  over  by  Mr.  George  J.  Gould  during 
the  continuance  of  this  contract? 

Mr.  HUNTINGTON.  $75,000  a  month,  and  it  ran  about  three  years. 
That  would  make  $2,700,000. 

Senator  MORGAN.  You  collected  that,  of  course,  out  of  the  people  of 
California? 

Mr.  HUNTINGTON.  If  we  did  the  business,  we  collected  our  freight 
upon  it.  We  always  do  so  before  we  deliver  the  goods. 

Senator  MORGAN.  So  that  the  loss  of  that  sum  fell  upon  them? 

Mr.  HUNTINGTON.  I  do  not  understand  that  there  would  be  a  loss  in 
paying  honest  freights  on  goods. 

Senator  MORGAN.  If  a  man  can  buy  a  thing  to-day  at  $20,  and  if  the 
price  to-morrow  is  $30,  and  he  must  have  it,  he  loses  $10.  The  people 
of  California  had  no  market  that  they  could  reach  except  by  water  or 
by  land.  They  were  confined  to  one  of  tjiose  means  of  reaching  the 
market,  and  if  they  had  to  pay  $75,000  a  month  for  the  privilege  of 
carrying  their  goods  on  the  railroads,  I  would  suppose  that  they  lost 
$75,000  a  month. 

Mr.  HUNTINGTON.  The  price  of  land  in  California  has  gone  up  ten- 
fold. That  seems  to  have  a  bearing  upon  this  same  thing.  We  have 
got  several  millions  of  dollars  in  shares  of  the  company,  and  we  haven't 
got  a  dividend  on  them  for  twenty  years. 

Senator  MORGAN.  The  price  of  mineral  lands  has  been  very  much 
increased? 

Mr.  HUNTINGTON.  I  never  owned  a  share  of  mining  stock  in  my  life, 
and  I  do  not  know  about  mineral  lands.  I  know  that  we  never  got  any 
dividends  on  shares  in  a  property  where  we  have  put  a  great  deal  of 
honest  money. 


GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS.  193 

Senator  MORGAN.  Do  you  say  that  you  have  never  got  any  dividend 
on  the  shares  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  No;  I  say  the  Southern  Pacific. 

Senator  MORGAN.  Then  you  have  received  no  dividend  on  the  shares 
of  the  Southern  Pacific? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  From  the  beginning  down  to  date? 

Mr.  HUNTINGTON.  No.  I  remember  that  at  one  time  Senator  Stan- 
ford, learning  that  we  had  made  $2,000,000  on  our  capital  of  a  hundred 
millions,  proposed  to  pay  a  dividend  of  2  per  cent,  but  I  said  no  j  that 
the  money  was  going  into  rolling  stock. 

Senator  MORGAN.  So  that  instead  of  dividing  this  money  you  put 
it  into  railroad  property  ? 

Mr.  HUNTINGTON.  We  improved  the  property. 

Senator  MORGAN.  Still,  the  shares  of  stock  ought  to  have  had  some 
increase  in  the  last  twenty  years. 

Mr.  HUNTINGTON.  Just  as  land  bas  had.  Land  which  twenty  years 
ago  was  worth,  in  the  neighborhood  of  these  railroad  lines,  $1.50  an  acre, 
is  now  worth  $100  an  acre.  That  does  not  look  as  if  we  were  hard 
upon  the  farmer. 

Senator  MORGAN.  Who  are  the  real  owners  of  the  Southern  Pacific 
Railroad  now? 

Mr.  HUNTINGTON.  There  are  a  great  many. 

Senator  MORGAN.  Who  are  the  large  ones? 

Mr.  HUNTINGTON.  Three  or  four  parties  have  most  of  the  shares. 
There  are  a  great  many  holders  in  California.  These  are  the  same 
parties  who  began  railroad  improvement  by  building  the  Central 
Pacific.  They  have  been  in  it  steadily  for  thirty-five  years. 

Senator  MORGAN.  They  always  kept  together? 

Mr.  HUNTINGTON.  They  always  kept  right  on. 

Senator  MORGAN.  So  that,  if  they  did  not  divide  profits  in  the  form 
of  money,  they  did  it  it  in  the  development  of  their  property  ? 

Mr.  HUNTINGTON.  We  kept  building,  and  shall  probably  continue  to 
the  end. 

Senator  MORGAN.  So  your  roads  have  increased  in  the  value  of  the 
property  and  not  in  money  ? 

Mr.  HUNTINGTON.  That  is  a  fair  statement.  We  must  have  a  good 
permanent  way  and  a  good  rolling  stock,  or  we  can  not  do  any  business. 

Senator  MORGAN.  How  much  money  have  you  put  into  railroading 
in  California  derived  from  other  parts  of  your  fortune  or  from  other 
business? 

Mr.  HUNTINGTON.  I  have  been  in  the  railroading  business  largely 
and  have  made  a  good  deal  of  money.  The  State  of  Virginia  gave  me 
a  railroad.  It  fell  into  my  hands  very  much  because  others  who  under- 
took it  failed  before  they  reached  a  market.  The  road  from  Richmond, 
Va.,  to  Covington  cost  twenty  millions.  I  finished  it  to  Cincinnati,  and 
when  it  was  all  done  it  represented  a  little  more  than  $70,000,000  in 
stock.  Then  I  got  the  Big  Sandy  line.  They  told  me  they  would  give 
me  that  road  if  I  would  finish  it,  and  I  did.  I  made  a  first-class  prop- 
erty of  it  and  made  a  good  deal  of  money  by  it.  Then  there  was  the 
Chesapeake  and  Ohio  Railroad,  400  miles  from  Lewiston  to  Memphis. 
That  road  remained  unfinished  so  many  years,  without  iron  being  put 
upon  it,  that  the  bridges  rotted  and  fell  down  before  I  took  the  road  in 
hand.  I  took  that  road  when  its  bonds  were  selling  in  Frankfort  and 
Amsterdam  at  18  and  20  cents  on  the  dollar,  and  I  bought  a  good  many 
of  the  bonds  at  18  and  20  cents  on  the  dollar.  I  bought  the  stock 
P  K 13 


194  GOVERNMENT   DEBT    OP    THE    PACIFIC    RAILROADS. 

almost  by  the  pound ;  it  appeared  to  be  good  for  nothing.  I  bought 
the  road  and  finished  it  and  made  a  first-class  road  of  it,  and  I  sold  the 
road  at  what  it  was  worth.  When  I  got  from  95  to  109  for  my  bonds — 
and  there  were  a  good  many  of  them,  too — I  sold  them  cheaper,  consid- 
ering the  value  of  the  road,  than  when  I  got  them  at  25  cents,  and 
they  were  not  worth  that.  So  that  1  sold  them  cheaper  than  I  bought 
them.  I  bought  the  Kentucky  Central  road  in  about  the  same  way. 
It  was  an  old  road,  pretty  well  run  down,  and  I  built  it.  From  Paris 
to  Livingston,  70  miles,  it  was  a  very  heavy  road  to  build.  Other 
parties  had  begun  to  build  it,  but  they  got  out  of  money,  and  I  bought 
the  shares  for  cash,  many  of  them  at  10  and  12  per  cent.  I  completed 
that  road  and  sold  my  shares — 45,000  of  them — for  55.  So  with  various 
roads.  Chattaroy  road,  running  up  the  Big  Sandy  Eiver,  is  another  of 
the  roads  that  I  took  in  hand.  1  commenced  to  build  that  road.  I  paid 
$54,000  to  put  2  miles  of  it  in  order  crossing  Elaine  Creek.  I  put  in  a 
new  bridge  and  made  a  straight  line  of  it  without  grade,  and  that  cost 
me  $54,000.  I  bought  a  road  through  the  canyon,  paying  cash  for  it, 
and  I  sold  that  seven  years  ago.  I  had  thirteen  roads  on  this  side 
of  the  Mississippi  and  south  of  the  Ohio  and  Potomac.  I  built  an 
elevated  road  in  Louisville.  Nearly  all  of  these  roads  were  broken- 
down,  worthless  property,  and  I  made  first-class  property  of  them,  sell- 
ing them  for  really  cheaper  than  I  bought  them,  because  they  were 
paying  interest  on  everything  when  I  sold,  and  they  were  absolutely 
worth  nothing  when  I  bought.  I  picked  up  the  old  Atlantic  and 
Pacific  road  and  bought  it  for  almost  nothing.  1  could  have  bought 
the  whole  of  it,  land  grant  and  everything,  for  a  trifle  when  it  reached 
Vinita,  but  our  people  said  that  the  thing  was  too  big.  I  put  all  the 
profit  that  I  made  in  these  great  works  into  railroads  in  California, 
except  what  I  put  into  the  shipyard  at  Newport  News, 

Senator  MORGAN.  So  that  you  had  the  capacity  to  build  all  these 
great  works  because  your  credit  was  very  good  ! 

Mr.  HUNTINGTON.  My  credit  was  good,  and  I  was  entitled  to  have  a 
good  credit.  I  worked  many  hours  a  day,  and  at  nights  when  necessary, 
All  that  money  has  gone  west  of  the  Mississippi,  and  it  is,  most  of  it, 
ju  shares  on  which  I  have  no  dividends. 

Senator  MORGAN.  In  what  companies  1 

Mr.  HUNTINGTON.  In  all  the  companies. 

Senator  MORGAN.  They  are  summed  up  in  the  eight  millions  of  the 
shares  of  the  Kentucky  company,  to  which  you  transferred  your  stock 
in  the  other  companies'? 

Mr.  HUNTINGTON.  No,  I  sold  the  shares  and  took  the  money  and 
invested  it  here  and  there. 

Senator  MORGAN.  Do  you  mean  that  you  took  all  this  immense 
accumulation  of  wealth  and  invested  it  in  railroads  west  of  the  Mis- 
sissippi? 

Mr.  HUNTINGTON.  I  bought  shares. 

Senator  MORGAN.  Do  you  own  them  now? 

Mr.  HUNTINGTON.  I  own  the  Southern  Pacific  shares. 

Senator  MORGAN.  You  said  yesterday  that  you  had  exchanged  the 
shares  you  held  in  those  various  companies  west  of  New  Orleans  for 
shares  in  the  Southern  Pacific  Company. 

Mr.  HUNTINGTON.  That  was  right;  I  say  it  now. 

Senator  MORGAN.  After  making  this  accumulation  in  the  East  in  all 
these  railroad  transactions,  you  took  your  money  out  West,  and  took 
those  shares  and  exchanged  them  for  stock  of  the  Southern  Pacific! 

Mr.  HUNTINGTON.  Yes. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  195 

Senator  MORGAN.  So  that  eight  millions  represents  what  you  put 
into  that  company? 

Mr.  HUNTINGTON.  I  did  not  say  that. 

Senator  MORGAN.  You  said  that  you  had  eight  millions  in  stock,  and 
that  you  took  it  to  the  Kentucky  company  and  expended  it  for  warrant 
stock  of  that  company. 

Mr.  HUNTINGTON.  It  did  not  all  go  there.  We  have  a  large  mileage 
in  Mexico. 

Senator  MORGAN.  All  this  accumulation  was  very  probably  based  on 
your  credit. 

Mr.  HUNTINGTON.  You  may  say  that.  It  was  not  all  done  at  one 
time.  One  road  was  sold  after  another. 

Senator  MORGAN.  But  the  basis  of  your  credit  came  from  the  han- 
dling of  those  subsidy  bonds  of  the  United  States  and  of  the  first- 
mortgage  bonds  of  the  Central  Pacific. 

Mr.  HUNTINGTON.  I  had  a  considerable  amount  of  paper  out  in  New 
York  in  1837.  I  went  to  Mr.  Platt,  No.  12  Maiden  Lane,  and  paid  him 
what  I  owed  him,  about  $3,000,  and  he  said,  "Mr.  Huntington,  that  is 
all  right.  Perhaps  you  would  like  to  know  that  you  are  the  only  man 
who  has  paid  a  note  to  me  for  the  last  three  mouths." 

Senator  MORGAN.  Still,  I  do  not  think  you  were  a  very  rich  man 
when  you  got  hold  of  this  railroad  in  California,  and  I  should  like  to 
know  just  how  much  you  were  worth  when  you  took  up  the  building  of 
that  road. 

Mr.  HUNTINGTON.  I  can  not  tell  you. 

Senator  MORGAN.  Were  you  worth  a  million  of  dollars? 

Mr.  HUNTINGTON.  We  ought  to  have  been. 
!    Senator  MORGAN.  Who  are  "we"? 

Mr.  HUNTINGTON.  I  question  whether  I  was  worth  a  million  dol- 
lars. 

Senator  MORGAN.  You  surely  know  what  you  were  worth  at  the  time, 
or  something  like  it. 

Mr.  HUNTINGTON.  No,  it  was  largely  in  property,  and  you  can  not 
tell  what  property  is  worth  until  you  sell  it. 

Senator  MORGAN.  Your  property  was  not  worth  much  as  a  basis  of 
credit  if  you  could  not  realize  upon  it. 

Mr.  HUNTINGTON.  A  man's  credit  is  not  so  much  on  what  a  man  has 
got  as  upon  what  he  is  able  to  do. 

Senator  MORGAN.  You  think  that  the  opportunity  afforded  to  you  by 
this  contract  between  the  Central  Pacific  and  the  Contract  and  Finance 
Company  did  not  amount  to  so  much  in  your  career,  but  that  your  suc- 
cess was  due  to  your  genius? 

Mr.  HUNTINGTON.  I  would  not  call  it  genius;  I  would  call  it  an  untir- 
ing application  to  business,  working  at  all  hours  of  the  day  and  night, 
and  always  practicing  a  very  strict  economy. 

Senator  MORGAN.  You  came  out  with  $119,000,000  on  the  face  value 
of  bonds  and  stocks  for  which  you  had  expended  probably  $70,000,000 
or  $80,000,000  in  making  the  road.  Is  that  your  statement? 

Mr.  HUNTINGTON.  The  $119,000,000  that  you  speak  of  was  not  worth 
the  $90,000,000  that  it  cost  to  build  the  road. 

Senator  MORGAN.  So  that  you  lost  money  by  building  the  road? 

Mr.  HUNTINGTON.  We  did,  until  the  securities  appreciated;  and  then 
we  paid  all  our  debts  and  had  something  to  the  good,  not  a  great  deal. 
If  anybody  had  given  me  $1,000,000 1  would  not  have  done  it  right  over 
again. 

Senator  MORGAN.  It  was  there  that  your  genius  came  to  your  relief— 


19C  GOVERNMENT    DEBT    OP    THE    PACIFIC    RAILROADS. 

the  Government  not  having  furnished  you  with  enough  money  to  build 
the  road. 

Mr.  HUNTINGTON.  No,  it  was  a  kind  of  staying  power.  I  was  not  as 
rich  when  we  ran  our  locomotives  from  Promontory  Point  to  Ogden  as 
when  we  started  to  build  the  road,  because  we  did  not  have  enough  out 
of  all  these  assets  to  pay  our  debts.  I  understand  these  things  pretty 
well. 

Senator  MORGAN.  I  think  I  can  understand  them,  too,  if  I  can  get 
them  all  down  in  proper  sequence,  but  I  have  not  been  able  to  do  that. 
When  did  the  Central  Pacific  enter  under  the  control  of  the  Kentucky 
company  ? 

Mr.  HUNTINGTON.  I  do  not  know.  That  is  easily  ascertained.  I 
should  say  ten  or  twelve  years  ago. 

Senator  MORGAN.  It  went  in  under  lease  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Have  you  got  a  copy  of  that  lease  t 

Mr.  HUNTINGTON.  I  have  not. 

Senator  MORGAN.  Is  it  easily  accessible? 

Mr.  HUNTINGTON.  I  think  so. 

Mr.  TWEED.  It  is  published  among  the  proceedings  of  the  Interstate 
Commerce  Commission,  and  it  has  also  been  published  in  the  report  of 
the  Commissioner  of  Railroads.  It  is  a  public  document. 

Senator  MORGAN  (to  Mr.  Huntiugton).  At  the  time  that  this  lease 
was  made,  did  you  have  a  meeting  of  the  board  of  directors  of  the  Cen- 
tral Pacific  ? 

Mr.  HUNTINGTON.  I  should  say  so;  I  am  quite  sure  we  had.  I  do 
not  know  that  I  was  there. 

Senator  MORGAN.  Did  the  board  of  directors  authorize  the  making 
of  that  lease? 

Mr.  HUNTINGTON.  I  should  say  so. 

Senator  MORGAN.  You  do  not  know  as  a  legal  question  whether  the 
Central  Pacific  Company  had  a  right  to  do  that  under  its  charter  from 
the  United  States  Government? 

Mr.  HUNTINGTON.  No,  I  do  not;  but  we  are  partially  working  under 
the  charter  from  the  State  of  California.  We  have  a  right  under  that 
charter,  I  am  pretty  sure. 

Senator  MORGAN.  So  that  you  derive  the  powers  of  your  corporation 
from  the  California  charter,  as  it  has  been  incorporated  in  and  amended 
by  the  United  States  charter? 

The  CHAIRMAN.  Would  the  incorporation  of  those  powers  in  the 
United  States  statute  interfere  with  any  powers  exercised  by  that  com- 
pany prior  to  that  act? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Then  you  had  authority  under  your  State  charter 
to  make  this  lease — for  ninety-nine  years,  was  it  not? 

Mr.  HUNTINGTON.  No;  as  I  recollect,  it  was  a  contract,  to  run  for 
five  years,  and  then  there  could  be  a  readjustment  if  it  worked  hard 
ship  for  either  company. 

Senator  MORGAN.  But  the  lease  ran  for  ninety-nine  years? 

Mr.  HUNTINGTON.  I  do  not  think  so;  I  am  not  sure. 

Senator  MORGAN.  I  think  you  so  stated  in  your  examination. 

Mr.  HUNTINGTON.  No,  I  think  not.  There  was  to  be  a  readjustment 
at  the  end  of  five  years;  that  is  my  recollection. 

Senator  MORGAN.  So  that  the  contract  would  run  indefinitely? 

Mr.  HUNTINGTON.  I  think  it  ran  ten  years,  and  that  it  then  was 
readjusted. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  197 

Senator  MORGAN.  What  I  wanted  to  know  was  whether  the  board 
of  directors  authorized  the  making  of  this  contract  by  any  resolution? 

Mr.  HUNTINGDON.  I  think  it  did. 

Senator  MORGAN.  Who  made  the  contract? 

Mr.  HUNTINGTON.  I  should  say  it  was  made  by  the  boards  of  directors 
of  the  two  companies. 

Senator  MORGAN.  Did  you  make  it! 

Mr.  HUNTINGTON.  I  think  1  did. 

Senator  MORGAN.  Did  you  sign  it? 

Mr.  HUNTINGTON.  1  am  not  sure.  The  vice-president  or  myself,  no 
doubt,  did  sign  it. 

Senator  MORGAN.  Were  you  the  president  of  the  Central  Pacific  at 
that  time? 

Mr.  HUNTINGTON.  No;  I  was  the  vice  president.  I  have  been  vice- 
president  of  the  company  since  its  organization. 

Senator  MORGAN.  You  say  that  the  lease  ran  on  for  five  years,  and 
that  it  was  then  changed? 

Mr.  HUNTINGTON.  I  am  not  sure  of  that;  but  I  am  very  sure  that 
there  is  a  provision  of  that  kind  in  the  lease. 

Senator  MORGAN.  I  want  to  know  about  the  fact. 

Mr.  HUNTINGTON.  I  am  not  able  to  say. 

Senator  MORGAN.  You  do  not  know  whether  there  was  any  change 
made  at  the  end  of  the  first  five  years? 

Mr.  HUNTINGTON.  I  do  not  know;  I  am  inclined  to  think  there  was 
none. 

Senator  MORGAN.  How  much  was  to  be  paid  for  the  annual  rent  of 
the  Central  Pacific,  under  the  contract? 

Mr.  HUNTINGTON.  That  I  can  not  say.  The  Southern  Pacific  had  to 
pay  the  interest  on  the  bonds,  to  take  care  of  the  property,  and  to  pay 
the  current  expenses. 

Senator  MORGAN.  Do  you  mean  the  interest  on  the  debt  to  the 
Government? 

Mr.  HUNTINGTON.  No;  but  the  interest  due  on  the  bonds. 

Mr.  LITTLER.  The  Southern  Pacific  paid  the  Central  Pacific 
$1,200,000  a  year  rent. 

The  CHAIRMAN.  The  rent  to  be  increased  afterwards? 

Mr.  LITTLER.  There  was  a  sliding  scale  in  the  lease.  The  lease  is 
set  out  in  full  in  our  report  (the  report  of  the  United  States  Pacific 
Kailroad  Commission). 

The  CHAIRMAN.  What  you  meant  by  a  sliding  scale  was  that  the  two 
companies  had  the  right  to  increase  or  reduce  the  rent? 

Mr.  LITTLER.  Yes. 

The  CHAIRMAN.  And  the  Southern  Pacific  did  reduce  the  rent? 

Mr.  LITTLER.  I  will  not  state  that. 

Mr.  HUNTINGTON.  I  do  not  think  the  Southern  Pacific  reduced  the 
rent.  It  changed  the  terms  of  the  lease,  as  I  remember. 

Senator  MORGAN.  You  say  that  this  lease  continued  in  operation  for 
ten  years? 

Mr.  HUNTINGTON.  I  think  so.  If  I  wanted  to  know  I  would  send  for 
the  contract.  It  seems  to  me  that  the  contract  could  not  be  changed 
except  at  the  end  of  every  period  of  five  years;  I  do  not  think  that 
there  was  a  readjustment  at  the  end  of  the  first  five  years. 

Senator  MORGAN.  Did  the  Kentucky  company  undertake  to  keep 
the  road  in  repair  during  the  first  five  years? 

Mr.  HUNTINGTON.  I  do  not  know  what  the  Southern  Pacific  Com- 
pany really  did  do,  but  it  is  all  set  forth  in  the  con  tract  j  I  can  not 


198  GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS. 

carry  these  things  in  my  head,  and  it  is  not  necessary.  I  never  bother 
myself  to  carry  things  in  my  head  when  I  know  that  I  can  send  into 
another  room  and  get  the  information. 

Senator  MORGAN.  At  the  end  of  the  first  five  years  was  any  change 
made  in  the  stipulations  of  the  lease? 

Mr.  HUNTINGTON.  I  can  not  say.  If  you  will  excuse  me,  Senator,  I 
have  answered  that  three  times. 

Senator  MORGAN.  But  you  know  whether  the  amount  of  the  rent  was 
reduced  f 

Mr.  HUNTINGTON.  No;  I  am  pretty  sure  it  was  not;  but  I  can  not  say 
positively. 

Senator  MORGAN.  At  what  time  was  this  contract  to  terminate? 

Mr.  HUNTINGTON.  That  I  can  not  say. 

Senator  MORGAN.  Has  it  ever  been  terminated? 

Mr.  HUNTINGTON.  We  are  working  under  a  different  contract;  it 
may  be  the  same,  and  it  may  not  be. 

Senator  MORGAN.  You  do  not  recollect  about  that! 

Mr.  HUNTINGTON.  No;  I  should  have  thought  that  it  was  changed, 
and  that  there  was  another  contract  made,  but  it  may  not  be  so. 

Senator  MORGAN.  Was  it  not  changed,  and  was  not  the  amount 
stipulated  to  be  paid  less  than  the  amount  which  had  been  paid  pre- 
viously ? 

Mr.  HUNTINGTON.  I  think  that  it  was  changed  so  that  whatever  the 
Southern  Pacific  Company  made  on  the  Central  Pacific  over  the  expenses 
went  to  the  Central  Pacific. 

Senator  MORGAN.  But  you  do  not  remember  when  that  change  was 
made  f 

Mr.  HUNTINGTON.  No,  I  do  not;  I  would  not  naturally  remember. 

Senator  MORGAN.  I  will  read  to  you  a  portion  of  the  statement  made 
by  you  before  the  Senate  Committee  on  Pacific  Railroads  on  the  Oth  of 
February,  1894: 

Senator  MORGAN.  Who  owns  the  Central  Pacific  now? 

Mr.  HUNTINGTON.  It  belongs  to  a  great  number  of  shareholders;  there  are  so 
many  of  them  that  I  do  not  know  who  they  are;  I  suppose  there  are  25,000  of  them 
altogether. 

Senator  MORGAN.  I  mean,  who  has  control? 

Mr.  HUNTINGTON.  We  control  it;  that  is,  the  present  board  of  directors,  repre- 
senting over  5,000  shareholders,  perhaps. 

Senator  MORGAN.  It  has  never  been  transferred,  on  long  lease  or  otherwise,  to  any 
other  corporation? 

Mr.  HUNTINGTON.  No.  We  leased  it  to  the  Southern  Pacific  Company  for  $1,360,000 
(as  I  have  it  in  my  mind  now,  and  I  think  that  is  correct),  with  the  proviso  that 
whenever  one  company  was  getting  the  advantage  in  the  contract,  at  the  end  of  any 
period  of  five  years  the  contract  could  be  renewed  or  changed,  or  something,  so  that 
one  company  would  not  be  at  the  expense  of  the  other.  This  last  year  it  lost  con- 
siderably. Now  the  lease  is  with  the  Central  Pacific,  taking  all  that  it  earns  up  to 
6  per  cent  upon  the  capital,  and  anything  beyond  that,  which  I  do  not  expect  to  live 
to' see,  is  divided,  half  to  the  Southern  Pacific  and  half  to  the  Central.  That  is  the 
present  lease. 

Senator  MORGAN.  There  is  a  subsisting  lease  on  that  road  now  to  another  com- 
pany; what  company  is  that? 

Mr.  HUNTINGTON.  That  is  the  Southern  Pacific. 

Senator  MORGAN.  Has  the  Southern  Pacific  gone  into  any  scheme  of  consolidation 
with  any  other  company? 

Mr.  HUNTINGTON.  The  Southern  Pacific  controls  something  near  7,000  miles  of 
road  by  ownership. 

Senator  MORGAN.  Through  what  corporation  has  that  arrangement  been  effected? 

Mr.  HUNTINGTON.  The  corporation  in  Kentucky. 

Senator  MORGAN.  Is  that  still  subsisting? 

Mr.  HUNTINGTON.  Yes,  sir. 

Senator  MORGAN.  So  that  the  lease  which  subsists  now  upon  the  Central  Pacific 
is  under  the  control  of  the  Kentucky  corporation? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  199 

Mr.  HUNTINGTON.  Yes,  sir;  but  they  make  nothing  out  of  the  lease,  as  I  stated, 
all  the  earnings  going  to  the  Central  Pacific. 

Senator  MORGAN.  How  long  is  that  lease  to  last? 

Mr.  HUNTINGTON.  I  think  it  is  the  old  lease,  which  will  expire  at  the  end  of  five 
years ;  but  there  can  be  no  hardship  now,  because  the  Central  Pacific  gets  all  that 
it  earns. 

Senator  MORGAN.  What  is  the  outside  length  of  the  term  of  lease? 

Mr.  HUNTINGTON.  Five  years;  that  is,  it  can  be  renewed  or  abrogated  at  the  end 
of  any  period  of  five  years. 

Senator  MORGAN.  Every  five  years  for  how  many  years? 

Mr.  HUNTINGTON.  I  have  not  the  lease  with  me,  but  I  think  it  can  be  abrogated 
at  the  end  of  any  period  of  five  years. 

Senator  MORGAN.  The  contract  is  to  run  in  that  way  for  ninety-nine  years,  is  it 
not? 

Mr.  HUNTINGTON.  I  do  not  think  it  is. 

Senator  MORGAN.  It  is  some  very  long  period,  is  it  not? 

Mr.  HUNTINGTON.  I  think  not;  I  think  it  can  be  abrogated  or  changed  at  the  end 
of  any  period  of  five  years. 

Senator  WOLCOTT.  How  long  will  it  last? 

Mr.  HUNTINGTON.  I  suppose  if  neither  party  called  it  would  probably  last  forever; 
but  I  think  it  is  subject  to  change  or  abrogation  by  either  party  at  the  end  of  any 
period  of  five  years. 

Senator  MORGAN.  Then  it  is  a  contract  for  sale,  subject  to  alteration  at  the  end 
of  every  period  of  five  years. 

Mr.  HUNTINGTON.  It  is  hardly  a  sale;  that  is,  we  did  not  contemplate  anything  of 
that  kind.  We  find  that  the  object  of  the  Southern  Pacific  Company  was  to  save 
an  expense  of  keeping  up  the  organization  of  (I  think)  some  forty  different  roads. 
Excepting  the  Central  Pacific  and  one  or  two  others  on  the  main  line  between  Port- 
laud,  Oreg.,  and  New  Orleans,  I  think  the  Southern  Pacific  owns  the  stock  of  all 
the  companies;  if  not  all,  probably  most  of  them. 

Senator  MORGAN.  What  is  the  name  of  that  Kentucky  corporation? 

Mr.  HUNTINGTON.  It  is  called  the  Southern  Pacific  Company. 

Senator  MORGAN.  That  controls,  really,  in  the  manner  you  have  stated,  all  of  the 
properties  of  which  you  have  been  speaking  ? 

Mr.  HUNTINGTON.  All  excepting  the  Central  Pacific.  The  contract  can  be  abro- 
gated, and  I  will  guarantee  that  that  shall  make  no  trouble  if  my  proposition  be 
accepted. 

Senator  MORGAN.  I  am  speaking  of  the  present  legal  situation. 

Mr.  HUNTINGTON.  Well,  I  do  not  know  what  the  legal  situation  might  be.  You 
can  tell  by  reading  a  copy  of  the  lease. 

Senator  MORGAN.  Has  not  the  board  of  directors  of  the  Kentucky  company — the 
Southern  Pacific  Company — the  rightful  control  over  all  the  properties  you  have 
been  speaking  of  here  this  morning? 

Mr.  HUNTINGTON.  No ;  I  think  not  the  Central  Pacific,  and  I  think  not  the  Cali- 
fornia Pacific. 

Senator  MORGAN.  The  point  1  want  to  get  at  is  this :  Did  you  find 
that  paying  $1,300,000  a  year  for  the  lease  of  the  Central  Pacific  was  a 
losing  deal? 

Mr.  HUNTINGTON.  As  I  recollect,  the  Southern  Pacific  lost  consider- 
ably by  it. 

Senator  MORGAN.  How  did  you  ascertain  that  loss? 

Mr.  HUNTINGTON.  I  suppose  the  bookkeeping  shows  it. 

Senator  MORGAN.  But  how  was  it  ascertained? 

Mr.  HUNTINGTON.  We  found  that  we  paid  out  more  than  we  received. 

Senator  MORGAN.  You  paid  out  $1,360,000  a  year,  and  found  that 
you  lost  money.  You  ascertained,  I  suppose,  that  the  income  of  the 
Central  Pacific  had  fallen  away  during  that  five  years? 

Mr.  HUNTINGTON.  Yes;  that  was  the  way  of  it. 

Senator  MORGAN.  And  when  the  income  of  the  Central  Pacific  had 
thus  fallen  away,  you  concluded  that  you  would  let  that  company  have 
that  and  no  more,  and  if  the  earnings  were  more  than  6  per  cent  on  the 
capital  stock  you  would  divide  the  surplus  with  it? 

Mr.  HUNTINGTON.  Yes;  that  is  how  I  recollect  it. 

Senator  MORGAN.  In  that  period  of  five  years  did  the  earnings  of  the 
Kentucky  corporation  (the  Southern  Pacific)  decrease  in  like  proportion! 


200  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  do  not  know.     I  presume  that  they  did. 

Senator  MORGAN.  I  do  not  want  presumption.  1  want  to  know  the 
facts. 

Mr,  HUNTINGTON.  Well,  I  can  not  say  whether  they  did  or  not;  but 
usually,  when  the  earnings  of  one  road  fall  off,  it  is  because  the  business 
is  poor  over  the  whole  line.  As  a  rule,  if  one  runs  short  they  all  run 
short. 

Senator  MORGAN.  At  the  time  you  consolidated  or  united  all  these 
companies  in  that  Kentucky  company  you  knew  the  income  of  each 
company  over  and  above  its  fixed  charges? 

Mr.  HUNTINGTON.  I  presume  we  did. 

Senator  MORGAN.  And  the  transfer  of  the  stock  that  you  owned  in 
those  companies  into  this  warrant  stock  of  the  Kentucky  company 
was  based  on  the  calculation  that  you  would  get  as  much  money  out  of 
that  stock  as  out  of  the  other? 

Mr.  HUNTINGTON.  That  was  the  natural  conclusion.  It  was  an  oper- 
ation to  make  it  possible  to  operate  the  roads  at  the  lowest  rates  so  as 
to  build  up  the  country  through  which  the  roads  passed. 

Senator  MORGAN.  To  build  up  the  country  or  to  build  up  the  roads? 

Mr.  HUNTINGTON.  To  build  up  the  country.  What  we  want  to  do 
is  to  build  up  the  country;  and  when  we  increase  the  traffic,  then  we 
begin  to  make  money.  I  think  we  would  double  the  business  on  any 
one  of  our  roads  if  we  could  get  the  rates  down  25  per  cent,  and  we 
would  make  more  money. 

Senator  MORGAN.  If  your  object  was  to  build  up  the  country,  I  sup- 
pose you  succeeded;  for  the  country  is  building  up  rapidly. 

Mr.  HUNTINGTON.  It  is  to  the  interest  of  the  company  to  get  a  good 
road,  and  to  build  up  the  country  as  fast  as  possible. 

Senator  MORGAN.  Was  it  not  your  real,  main  purpose  to  make  money 
by  economizing? 

Mr.  HUNTINGTON.  We  have  to  do  that,  or  we  would  not  make  both 
ends  meet. 

Senator  MORGAN.  Then  your  object  was  either  to  make  money  or  to 
save  money? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  I  should  like  to  know  from  you  whether  your  object 
in  making  this  arrangement  with  the  Central  Pacific  Company  was  not 
to  make  money  ? 

Mr.  HUNTINGTON.  Not  altogether.  Of  course  we  had  that  object  in 
view  in  a  general  way. 

Senator  MORGAN.  Was  it  in  part  to  make  money? 

Mr.  HUNTINGTON.  It  was  in  part  to  make  money,  and  to  build  up 
the  country  along  the  road.  We  thought  that  in  the  end  that  would 
result  satisfactorily. 

Senator  MORGAN.  You  worked  for  glory  as  well  as  for  money? 

Mr.  HUNTINGTON.  No ;  I  never  worked  much  for  glory. 

Senator  MORGAN.  To  get  down  to  plain  facts,  I  put  the  question  to 
you  in  this  form :  After  you  formed  this  arrangement  which  was  com- 
pleted in  the  organization  of  the  Kentucky  company,  and  after  you  had 
made  this  lease  of  the  Central  Pacific,  did  not  the  income  of  the  Ken- 
tucky company  increase  during  the  first  five  years  of  this  lease  over 
the  aggregate  of  the  several  companies  of  which  it  was  formed? 

Mr.  HUNTINGTON.  I  should  suppose  it  would.  I  do  not  recollect  the 
figures;  but  I  should  say  it  would  naturally  increase,  as  the  facilities 
for  doing  business  were  so  much  better. 

Senator  MORGAN.  About  how  much  were  they  increased! 


GOVERNMENT    DEBT   OF    THE    PACIFIC    RAILROADS.  201 

Mr.  HUNTINGTON.  I  do  not  remember.  I  do  not  recollect  whether 
even  they  did  increase;  but  I  think  they  did. 

Senator  MORGAN.  Was  the  increase  very  considerable! 

Mr.  HUNTINGTON.  It  goes  up  and  down. 

Senator  MORGAN.  Was  it  satisfactory? 

Mr.  HUNTINGTON.  Sometimes,  probably,  it  was. 

Senator  MORGAN.  Was  it  more  satisfactory  to  the  parties  concerned 
than  the  previous  arrangement  had  been  by  which  each  company  con- 
ducted its  own  business? 

Mr.  HUNTINGTON.  Yes;  it  was  more  satisfactory  than  when  these 
companies — perhaps  forty  of  them — were  working  separately. 

Senator  MORGAN.  It  was  more  satisfactory  and  more  profitable. 
How  did  you  ascertain  that  the  Central  Pacific,  during  those  first  five 
years,  was  receiving  from  the  Kentucky  company  more  than  it  ought 
to  receive? 

Mr.  HUNTINGTON.  We  kept,  of  course,  a  debit  and  credit  account, 
and  we  knew,  of  course,  how  things  were  going. 

Senator  MORGAN.  Was  it  not  in  consequence  of  the  fact  that  the 
income  of  the  Central  Pacific  was  constantly  decreasing,  and  that 
during  those  five  years  it  decreased  very  materially? 

Mr.  HUNTINGTON.  No;  I  think  not. 

Senator  MORGAN.  Why  do  you  think  not? 

Mr.  HUNTINGTON.  I  do  not  know  why  it  should;  that  is  all.  I  do 
not  pretend  to  carry  these  figures  in  my  head. 

Senator  MORGAN.  If  the  income  of  the  Central  Pacific  during  those 
first  five  years  did  not  decrease  very  materially,  what  excuse  had  you 
for  cutting  down  the  amount  of  money  you  were  paying  to  it? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  It  is  all  a  mystery  to  you,  is  it? 

Mr.  HUNTINGTON.  There  was  some  good  and  sufficient  reason.  Prob- 
ably some  of  the  shareholders  thought  it  would  be  better  for  them  to 
take  the  earnings  of  their  road. 

Senator  MORGAN.  Do  you  not  know  that,  during  the  first  five  or  ten 
years  of  the  lease,  the  income  of  the  Central  Pacific  continually  ran 
down? 

Mr.  HUNTINGTON.  No,  I  do  not  know  it;  but  it  is  easily  ascertained. 

Senator  MORGAN.  Tell  us  how  we  can  ascertain  it. 

Mr.  HUNTINGTON.  I  think  I  can  write  to  California  for  the  figures. 

Mr.  LITTLER.  You  will  find  all  these  figures  in  the  annual  reports 
of  the  Central  Pacific  taken  from  the  books  of  the  company,  showing 
the  gross  and  net  earnings  of  the  company  from  the  time  it  began 
operations. 

Senator  MORGAN  (to  Mr.  Littler).  Do  these  reports  show  an  increase 
or  decrease  during  the  first  five  years  of  that  lease? 

Mr.  LITTLER.  I  do  not  remember. 

Senator  MORGAN  (to  Mr.  Huntington).  I  will  assume  that,  during 
the  first  five  years  of  this  lease,  the  income  of  the  Central  Pacific  did 
run  down,  and  did  run  down  materially.  I  will  assume  further,  that  it 
was  because  of  this  fact,  and  not  because  of  any  burden  from  the  lease 
with  this  Kentucky  company,  that  the  terms  of  the  contract  were 
changed  so  that  the  Central  Pacific  should  not  receive  any  more  than 
it  earned.  In  that  intermediate  period  who  actually  controlled  the 
freight  which  came  to  the  Central  Pacific  from  the  direction  of  Oregon 
and  from  the  direction  of  the  Pacific  Ocean,  or  any  other  direction  in 
California,  and  which  found  its  way  across  the  continent  through  the 
Central  Pacific  and  the  Union  Pacific  roads? 


202  GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  These  things  are  usually  done  by  an  agreement 
between  the  companies  interested  in  the  business. 

Senator  MORGAN.  I  am  not  asking  what  is  usually  done.  I  am  asking 
who  controlled  that  business. 

Mr,  HUNTINGTON.  I  have  very  little  doubt  that  that  was  the  way  it 
was  done — at  agreed  rates. 

Senator  MORGAN.  Was  it  not  entirely  in  the  power  of  this  Kentucky 
cottipany  to  direct  that  this  freight  should  pass  over  the  Central  Pacific 
road,  or  should  pass  over  the  Southern  Pacific  road,  just  as  that  com- 
pany proposed,  except  shippers  otherwise  ordered? 

Mr.  HUNTINGTON.  There  has  been  skarp  competition,  and  most  of 
the  railroad  companies  have  had  their  own  agents  in  California  seeking 
business.  We  did  not  control  that  business,  because  shippers  got  the 
best  rates  they  could.  I  think  that  half  a  dozen  railroads  from  Chicago 
had  agents  in  San  Francisco  soliciting  freight. 

Senator  MORGAN.  The  great  company  which  you  controlled,  running 
from  New  Orleans  to  Portland,  Oreg.,  and  having  an  agent  in  San 
Francisco,  was  trying,  I  suppose,  to  get  all  the  freight  and  all  the  passen- 
gers it  could  I 

Mr.  HUNTINGTON.  I  suppose  that  our  agents  were  working  for 
business. 

Senator  MORGAN.  That  is  what  they  were  there  for? 

Mr.  HUNTINGTON.  Yes;  and  all  the  other  companies  were  working 
for  the  same  thing. 

Senator  MORGAN.  Who  was  the  agent  for  the  Central  Pacific  all  that 
time? 

Mr.  HUNTINGTON.  Mr.  Stubbs  was  at  the  head. 

Senator  MORGAN.  He  was  not  the  agent  for  both  companies,  was 
he? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Who  was  your  agent  at  that  time? 

Mr.  HUNTINGTON.  I  do  not  know;  Mr.  Gray  was  at  the  head  of  the 
traffic  department  there. 

Senator  MORGAN.  You  have  said  that  Mr.  Stubbs  was  the  freight 
agent  for  the  Central  Pacific.  Who  was  the  freight  agent  for  your  com- 
pany? 

Mr.  HUNTINGTON.  I  have  stated  that  Mr.  Stubbs  was  at  the  head  of 
the  traffic  department  for  the  Southern  Pacific,  and  he  may  also  have 
been  at  the  head  of  the  traffic  department  of  the  Central  Pacific;  I  do 
not  know.    There  was  a  Mr.  Snurr,  a  Mr.  Platt,  and  a  Mr.  Gray. 
<•  Senator  MORGAN.  You  had  a  head  agent  for  both  roads? 
*  Mr.  HUNTINGTON.  I  think  very  likely. 

Senator  MORGAN.  You  can  not  tell  who  they  were? 

Mr.  HUNTINGTON.  No;  I  have  nothing  to  do  with  those  men. 

Senator  MORGAN.  You  have  named  five  or  six  men.  Who  was  the 
head  man? 

Mr.  HUNTINGTON.  Mr.  Stubbs. 

Senator  MORGAN.  For  the  Central  Pacific? 

Mr.  HUNTINGTON.  No;  I  think  for  the  Southern  Pacific,  and  perhaps 
for  the  Central  Pacific. 

Senator  MORGAN.  So  it  rested  with  Mr.  Stubbs  to  say  whether  he 
would  send  freight  over  the  Southern  Pacific  road  or  over  the  Central 
Pacific  road  ? 

Mr.  HUNTINGTON.  Perhaps  so ;  but  there  is  a  very  small  percentage 
of  California  business  which  comes  to  New  York.  The  largest  part  of 
the  tonnage  stops  in  the  Mississippi  Valley. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  203 


The  CHAIRMAN.  If  it  rested  with  Mr.  Stubbs  to  send  freight  either 
by  one  road  or  the  other,  that  was  simply  in  reference  to  unconsigned 
freight? 

Mr.  HUNTINGTON.  Yes ;  of  course  every  shipper  has  the  direction  of 
how  his  freight  goes. 

The  CHAIRMAN.  The  shippers  would  be  the  judges? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  We  have  got  to  the  point  where  Mr.  Stubbs  is  the 
freight  agent  of  both  roads,  and  it  rested  entirely  with  Mr.  Stubbs  to 
say  whether  freight  should  go  over  the  Central  Pacific  or  over  the 
Southern  Pacific? 

Mr.  HUNTINGTON.  Unless  the  shippers  give  directions,  with  most  of 
the  business  there,  the  railroads  are  looking  to  see  where  the  freights 
shall  go  after  they  get  to  Ogden.  The  Chicago  and  Burlington,  and 
the  Chicago  and  Eock  Island,  and  the  Chicago  and  Northwestern,  and 
various  other  companies,  are  watching  for  freight. 

Senator  MORGAN.  I  am  not  trying  to  follow  you  in  your  statement. 
I  am  trying  to  get  at  a  particular  fact. 

Mr.  HUNTINGTON.  But  I  want  to  show  you  how  that  business  is 
handled. 

Senator  MORGAN.  I  want  to  know  if  Mr.  Stubbs  was  the  man  who 
had  the  power,  as  freight  agent  of  both  these  roads,  to  determine 
whether  the  freight  should  go  one  way  or  the  other,  unless  it  was 
consigned  and  was  so  marked  by  the  shippers'? 

Mr.  HUNTINGTON.  I  suppose  he  would  have,  but  the  facts  are  that 
very  little  of  this  trade  comes  to  New  York.  I  suppose  he  found  out 
what  the  shippers  wanted.  We  send  nearly  all  the  freight  over  the 
Central  Pacific. 

Senator  MORGAN.  Who  employed  Mr.  Stubbs  ? 

Mr.  HUNTINGTON.  He  was  employed  by  the  Central  Pacific  when  the 
Southern  Pacific  leased  the  Central  Pacific.  He  was  originally  in  the 
employment  of  the  Central  Pacific. 

Senator  MORGAN.  Then  when  the  Southern  Pacific  leased  the  Cen- 
tral Pacific  Mr.  Stubbs  became  an  employee  of  the  Southern  Pacific,  or 
the  Kentucky  company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  So  that  Mr.  Stubbs  was  the  actual  agent  of  tho 
Southern  Pacific  Company  and  controlled  the  freight  over  the  Southern 
Pacific  and  the  Central  Pacific  at  his  will,  except  in  the  case  where  the 
shipper  otherwise  directed;  that  was  true? 

Mr.  HUNTINGTON.  I  should  say  that  that  was  naturally  the  case. 

Senator  MORGAN.  Being  employed  by  the  Kentucky  company,  was 
he  there  to  work  against  the  interests  of  that  company  or  in  favor  of 
them  ! 

Mr.  HUNTINGTON.  He  was  there  to  work  in  favor  of  the  Kentucky 
company  and  of  the  Central  Pacific.  Certain  things  went  one  way  and 
certain  things  another,  and  the  shippers,  I  suppose,  nearly  all  direct 
their  own  freight. 

Senator  MORGAN.  You  had  stock  in  the  Southern  Pacific  (the  Ken- 
tucky company)  to  the  amount  of  probably  $10,000,000  ? 

Mr.  HUNTINGTON.  No,  I  do  not  know  how  much  I  had. 

Senator  MORGAN.  And  in  the  Central  Pacific  you  had  none  at  all? 

Mr.  HUNTINGTON.  Oh,  yes;  I  had  some.  I  always  had  stock  in  the 
Central  Pacific. 

Senator  MORGAN.  How  much? 

Mr.  HUNTINGTON.  Four  or  five  thousand  shares. 


204  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  But  your  great  interest  was  in  the  direction  of  the 
Southern  Pacific? 

Mr.  HUNTINGTON.  I  had  more  money  in  the  shares  of  the  Southern 
Pacific  than  in  the  shares  of  the  Central  Pacific. 

Senator  MORGAN.  You  had  more  money  in  every  way? 

Mr.  HUNTINGTON.  I  had  no  money  excepting  the  shares. 

Senator  MORGAN.  Had  it  not  been  one  of  your  leading  purposes  in 
building  that  Southern  Pacific  road,  and  in  getting  steamers  across  the 
Atlantic,  to  give  that  road  all  the  advantage  you  could? 

Mr.  HUNTINGTON.  I  have  had  an  ambition  to  get  a  European  trade 
at  a  price  which  would  pay  our  fruit  growers  to  send  their  fruit  to  west- 
ern Europe.  That  has  been  an  ambition  of  mine  for  a  good  many  years. 

Senator  MORGAN.  And  your  ambition  (that  is  to  say,  your  interest, 
stimulated  by  your  pride)  had  led  you  to  be  too  warmly  a  friend  and 
advocate  for  business  on  the  Southern  Pacific? 

Mr.  HUNTINGTON.  Not  for  any  but  legitimate  trade. 

Senator  MORGAN.  For  any  trade  which  you  could  get? 

Mr.  HUNTINGTON.  We  take  goods  on  that  line. 

Senator  MORGAN.  It  is  a  very  much  longer  line  than  the  line  of  the 
Central  Pacific,  is  it  not? 

Mr.  HUNTINGTON.  The  Central  Pacific  is  the  shortest  line  to  New 
York. 

Senator  MORGAN.  I  am  speaking  of  the  line  between  New  Orleans 
and  Portland. 

Mr.  HUNTINGTON.  The  Southern  Pacific  does  not  do  much  business 
from  Portland. 

Senator  MORGAN.  It  is  farther  from  San  Francisco  to  New  Orleans 
than  from  San  Francisco  to  Ogden,  is  it  not? 

Mr.  HUNTINGTON.  Oh,  yes. 

Senator  MORGAN.  Very  much  farther? 

Mr.  HUNTINGTON.  Yes ;  twice  as  far. 

Senator  MORGAN.  So  that  the  long  haul  was  over  the  Southern 
Pacific  line? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  it  was  to  your  interest,  was  it  not,  to  have  the 
long  haul? 

Mr.  HUNTINGTON.  It  might  be,  or  it  might  not  be.  In  the  article  of 
fruit,  that  nearly  all  went  the  other  way. 

Senator  MORGAN.  If  you  had  found  that  Mr.  Stubbs  had  set  himself 
to  work  to  divert  freight  from  the  Southern  Pacific  and  to  send  it  across 
the  Central  Pacific  you  would  have  dismissed  him,  would  you  not? 

Mr.  HUNTINGTON.  No,  I  should  not.  I  do  not  know  why  I  should. 
He  is  there  to  attend  to  that  business. 

Senator  MORGAN.  Would  ifc  not  be  because  he  was  making  you  lose 
money  all  the  time? 

Mr.  HUNTINGTON.  Not  necessarily. 

Senator  MORGAN.  Would  it  not  be  a  losing  business  for  the  Southern 
Pacific  to  have  an  agent  in  San  Francisco  who  would  divert  freights 
from  that  road  and  send  them  by  the  Central  Pacific? 

Mr.  HUNTINGTON.  There  are  a  good  many  things  which  go  over  that 
way.  The  Central  Pacific  has  carried  more  than  50  per  cent  of  all  the 
business  from  San  Francisco — 50  per  cent  of  the  business  on  all  the 
railroad  lines,  including  the  connection  with  Portland,  Puget  Sound, 
and  Seattle. 

Senator  MORGAN.  Was  not  the  Southern  Pacific  in  competition  with 
the  Central  Pacific  at  the  time  that  this  lease  was  binding  and  in  force? 


Mr.H 


GOVERNMENT   DEBT   OF    THE   PACIFIC    RAILROADS.  205 


HUNTINGTON.  To  a  certain  extent,  yes. 

Senator  MORGAN.  They  were  competing  roads? 

Mr.  HUNTINGTON.  To  a  certain  extent. 

Senator  MORGAN.  As  much  so  as  any  other  roads  ? 

Mr.  HUNTINGTON.  No ;  I  should  think  not.  They  might  cut  rates  and 
all  that  against  each  other. 

Senator  MORGAN.  Was  not  that  competition  the  real  reason  why  the 
income  of  the  Central  Pacific  ran  down  so  much  that  the  Southern 
Pacific  could  not  afford  to  pay  it  $1,300,000  a  year? 

Mr.  HUNTINGTON.  No;  I  do  not  think  so. 

Senator  MORGAN.  What  was  the  real  reason? 

Mr.  HUNTINGTON.  The  general  shrinkage  in  rates.  Properties  have 
gone  down  steadily. 

Senator  MORGAN.  Did  the  general  shrinkage  of  rates  affect  the  Cen- 
tral Pacific  any  more  than  it  affected  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  should  think  not. 

Senator  MORGAN.  Then  how  could  it  be  the  general  shrinkage  of 
rates  which  reduced  the  income  of  the  Central  Pacific  and  did  not 
reduce  the  income  of  the  Southern  Pacific? 

Mr.  HUNTINGTON.  If  that  is  a  fact  I  can  not  account  for  it. 

Senator  MORGAN.  Was  it  not  your  interest,  and  the  interest  of  every 
man  concerned  in  the  Kentucky  company,  to  get  trade  away  from  the 
Central  Pacific  and  to  bring  it  over  this  line? 

Mr.  HUNTINGTON.  No,  I  think  not ;  we  worked  those  properties  so 
as  to  do  the  fair  and  proper  thing  by  each.  A  considerable  part  of  our 
tonnage  which  we  take  from  New  York  over  the  Southern  Pacific  is 
low-priced  tonnage.  Such  things  as  nails,  pig  iron,  bar  iron,  and  the 
like,  we  take  from  New  York  through  to  the  coast.  It  is  on  these  low- 
priced  articles  that  we  have  competed  with  the  vessels  round  Cape 
Horn.  The  railroads  from  New  York  are  very  strong  companies,  and 
we  have  to  work  in  harmony  with  them,  otherwise,  and  if  we  took 
what  did  not  legitimately  belong  to  the  Southern  Pacific,  these  com- 
panies would  cut  rates  all  to  pieces. 

Senator  MORGAN.  Does  any  part  of  the  traffic  which  you  bring  out 
on  these  steamers  from  New  York  to  New  Orleans,  or  from  across  the 
Atlantic  to  New  Orleans,  and  thence  to  San  Francisco,  go  across  the 
Central  Pacific? 

Mr.  HUNTINGTON.  No,  it  can  not  reach  the  Central  Pacific.  The 
freight  of  a  steamer  coining  to  New  Orleans  from  Europe  can  hardly 
find  its  way  up  the  Central  Pacific;  it  does  not  belong  there. 

Senator  MORGAN.  So  that  all  the  advantages  of  the  line  of  about 
twenty  steamers  between  New  Orleans  and  New  York,  and  across  the 
Atlantic  Ocean,  go  to  the  competing  line  and  not  to  the  Central 
Pacific? 

Mr.  HUNTINGTON.  The  stuff  which  we  mostly  direct  to  New  Orleans 
from  western  Europe  is,  I  think,  generally  consigned  through,  and 
goes  through  all  the  way  on  the  Southern  Pacific.  I  do  not  know  any 
particular  business  from  western  Europe  which  we  bid  for. 

Senator  MORGAN.  I  am  speaking  about  the  business  between  New 
York  and  San  Francisco  by  steamers  which  land  at  New  Orleans, 
where  the  business  takes  your  railroad  lines. 

Mr.  HUNTINGTON.  We  pick  up  a  good  deal  of  business  along  tide 
water,  but  we  can  not  get  more  than  about  just  so  much. 

Senator  MORGAN.  The  advantage  of  all  of  this  business  goes  to  the 
Southern  Pacific,  which  competes  with  the  Central  Pacific? 

Mr.  HUNTINGTON.  Yes.    It  competes  with  it  like  all  the  other  lines, 


206  GOVEKNMENT    DEBT    OF    THE   PACIFIC    RAILROADS. 

but  not  to  the  same  extent.  The  great  through  tonnage  which  is  picked 
up  is  west  of  the  Alleghauies. 

Senator  MORGAN.  You  have  been  vice-president  of  the  Central 
Pacific  from  the  time  it  was  built  until  to-day.  State  something  which 
you  have  ever  done  to  increase  the  freights  and  travel  on  the  Central 
Pacific  road. 

Mr.  HUNTINGTON.  There  are  probably  a  dozen  roads  to  New  York 
that  have  through  connection  with  San  Francisco,  and  all  of  them 
solicit  that  business.  We  have  one  agent  in  New  York,  and  the  New 
York  Central  has  one  and  more,  and  the  Pennsylvania  has  one,  and  the 
Baltimore  and  Ohio  has  one. 

Senator  MORGAN.  I  am  speaking  of  any  particular  efforts  which  you 
have  made  to  increase  the  traffic  of  the  Central  Pacific  Eailroad 
Company. 

Mr.  HUNTINGTON.  I  never  go  out  soliciting  trade. 

Senator  MORGAN.  My  question  is  not  as  narrow  as  that.  My  ques- 
tion is,  What  have  you  done  as  vice-president  of  the  Central  Pacific  in 
order  to  increase  the  traffic  on  that  road? 

Mr  HUNTINGTON.  We  have  our  agents,  who  take  business. 

Senator  MORGAN.  I  want  to  know  what  particular  effort  you  nave 
made. 

Mr.  HUNTINGTON.  We  depend  largely  for  business  on  these  other 
roads.  There  is  no  interest  which  we  could  have  quite  equal  to  that  of 
the  Pennsylvania  or  the  New  York  Central. 

Senator  MORGAN.  I  understand  you,  by  your  evasion  of  my  question, 
to  mean  that  you  have  not  taken  any  steps;  that  you  have  not,  as  vice- 
president  of  the  Central  Pacific,  taken  any  particular  steps  to  increase 
the  traffic  between  San  Francisco  and  the  Central  Pacific? 

Mr.  HUNTINGTON.  Well,  I  have  not  taken  any  steps  to  increase  it  the 
other  way.  I  did  everything  I  could;  I  put  the  best  rolling  stock  that 
we  could  have  on  the  road,  and  the  Central  Pacific  is  the  best  surfaced 
road  in  the  United  States.  That  is  all  that  the  executive  officer  of  a 
road  can  do. 

Senator  MORGAN.  I  shall  just  assume  that  your  evasion  of  the  ques- 
tion means  that  you  have  not  done  anything. 

Mr.  HUNTINGTON.  I  have  not  intended  to  evade  the  question.  The 
executive  department  of  a  railroad  company  has  nothing  to  do  but  to 
keep  its  property  in  the  best  possible  condition  to  do  the  business. 
There  is  no  better  surfaced  road  in  the  United  States  than  the  Central 
Pacific. 

Senator  MORGAN.  You  have  stated  that  a  good  many  times;  thirty 
or  forty  times.  Are  you  an  officer  of  the  Kentucky  company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  office  do  you  hold  in  that  company! 

Mr.  HUNTINGTON.  I  am  its  president. 

Senator  MORGAN.  What  have  you  done  in  behalf  of  that  company, 
as  its  president,  to  extend  its  traffic? 

Mr.  HUNTINGTON.  I  have  kept  the  road  in  first-rate  condition. 

Senator  MORGAN.  Is  that  all  ? 

Mr.  HUNTINGTON.  That  is  all. 

Senator  MORGAN.  I  thought  you  made  rather  a  boast  of  ft  that  you 
had  built  twenty  ships  for  that  line. 

Mr.  HUNTINGTON.  No;  I  said  there  were  twenty  ships  on  that  line. 

Senator  MORGAN.  Did  you  not  say  that  you  had  made  contracts  for 
building  them? 

Mr.  HUNTINGTON.  No;  I  said  that  I  had  built  four  of  them. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS  207 


Senator  MORGAN.  And  that  you  had  made  contracts  also  for  the  pur 
pose  of  extending  the  trade  of  the  Southern  Pacific  across  the  Atlantic 
Ocean  direct! 

Mr.  HUNTINGTON.  Yes;  I  think  Mr.  Hutchinson  has  done  it  under 
my  orders. 

Senator  MORGAN.  Do  you  not  claim  credit  for  establishing  that  hue 
of  twenty  steamers'? 

Mr.  HUNTINGTON.  No;  that  line  of  steamers  has  been  running  thirty 
years. 

Senator  MORGAN.  Did  you  not  claim  credit  for  it  yesterday? 

Mr.  HUNTINGTON.  No;  I  claimed  credit  for  the  good  condition  of  all 
the  property,  and  I  said  that  we  had  some  very  flue  steamers  running 
between  New  York  and  New  Orleans. 

Senator  MORGAN.  That  is  not  any  answer.  Answer  me  whether  or 
not  you  did  not  yesterday  claim  credit  for  having  established,  in  behalf 
of  the  Southern  Pacific  (the  Kentucky  company),  a  line  of  steamers 
between  New  York  and  New  Orleans,  and  also  one  across  the  Atlantic 
Ocean  ? 

Mr.  HUNTINGTON.  I  might  have  taken  some  credit  for  it,  and  prob- 
ably I  am  entitled  to  some;  but  the  line  across  the  Atlantic  is  to  send 
goods  to  Europe  at  certain  seasons  of  the  year,  particularly  during  the 
cotton  season. 

Senator  MORGAN.  Were  not  both  these  steamship  arrangements  made 
by  your  personal  assistance? 

Mr.  HUNTINGTON.  Not  the  arrangement  for  the  European  line;  Mr. 
Hutchinson  did  that. 

Senator  MORGAN.  Under  your  direction? 

Mr.  HUNTINGTON.  No;  I  had  been  trying  to  get  a  line  of  steamers 
there  for  a  number  of  years,  but  Mr.  Hutchinson  said  that  he  thought 
the  best  way  was  to  charter  steamers  during  certain  parts  of  the  year. 

Senator  MORGAN.  To  sum  the  matter  up,  have  you  not  been  very 
active  and  efficient  in  extending  the  trade  of  the  Southern  Pacific  (the 
Kentucky  company)  both  by  land  and  sea,  and  more  particularly  by 
Bea,  between  New  York  and  New  Orleans  and  across  the  Atlantic  Ocean  ? 

Mr.  HUNTINGTON.  Yes;  I  have  been  endeavoring  for  a  long  time  to 
get  a  good  line  from  New  Orleans  to  Europe. 

Senator  MORGAN,  That  was  in  the  interest  of  your  Southern  Pacific 
Company? 

Mr.  HUNTINGTON,  Yes;  to  a  certain  extent. 

Senator  MORGAN.  Being  vice-president  of  the  Central  Pacific  Com- 
pany and  president  of  the  Kentucky  company,  you  have  bestowed  your 
energies  and  abilities  (admittedly  very  great)  on  the  betterment  and 
improvement  of  the  condition  of  the  Southern  Pacific  line,  and  you  can 
not  state  what  you  have  done  as  vice-president  of  the  other  corporation 
to  help  it  at  all? 

Mr.  HUNTINGTON.  I  kept  the  road  in  first-rate  condition,  putting  in 
iron  bridges  where  we  had  wooden  ones,  and  ballasting  the  road. 

Senator  MORGAN.  Have  you  done  that,  or  has  it  been  done  by  your 
subordinate  officers  ? 

Mr.  HUNTINGTON.  It  has  been  done  under  my  general  direction. 

Senator  MORGAN.  Have  you  kept  the  Southern  Pacific  road  in  as 
good  a  condition? 

Mr.  HUNTINGTON.  I  think  so.  We  try  to  keep  all  our  roads  in  a 
good  condition,  and  I  never  thought  of  keeping  the  Southern  Pacific 
road  in  a  better  condition  than  the  Central  Pacific  road. 

Senator  MORGAN.  Have  you  really  expected  that  the  Central  Pacific 


208  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Company  could  have  any  prosperity  when  its  guardian  and  builder  was 
in  competition  with  it,  and,  when  as  president  of  another  road,  he  was 
continually  profiting  by  the  freight  which  the  Central  Pacific  lost? 

Mr.  HUNTINGDON.  I  believe  that  the  Central  Pacific  has  been  han- 
dled as  well  and  better  under  my  management  than  it  would  have  been 
under  any  other  management. 

Senator  MORGAN.  How  has  it  done,  in  comparison  with  the  Southern 
Pacific  ? 

Mr.  HUNTINGDON.  It  is  not  better  nor  worse  than  the  Southern 
Pacific  in  its  physical  condition.  It  is  probably  a  little  better  than  the 
Southern  Pacific  because  it  is  an  older  road. 

Senator  MORGAN.  I  am  talking  about  its  earnings? 

Mr.  HUNTINGTON.  I  have  never  directed  any  of  the  operating  depart- 
ments to  take  freight  away  from  the  Central  Pacific  and  to  send  it  l>y 
the  Southern  Pacific. 

Senator  MORGAN.  But  you  knew  perfectly  well  that  it  was  done. 

Mr.  HUNTINGTON.  No ;  and  I  have  told  them  further  to  send  fruit  by 
the  Central  Pacific.  It  is  about  the  same  distance  from  El  Paso  by 
each  road,  but  I  do  not  think  that  one  car  of  fruit  from  El  Paso  has 
gone  by  the  Southern  Pacific  for  every  fifty  cars  which  have  gone  by  the 
Central  Pacific. 

Senator  MORGAN.  The  fruit  from  Southern  California  would  have  to 
come  to  San  Francisco? 

Mr.  HUNTINGTON.  Oh,  no;  I  am  speaking  of  the  country  south  of 
Madre  Mountain  which  takes  in  the  best  fruit  country  in  California, 
particularly  as  to  oranges.  I  think  that  forty-nine  fiftieths  of  the  fruit 
cars  from  that  country  have  gone  over  the  Central  Pacific. 

Adjourned  till  Thursday,  February  20,  at  10.30  a.  m. 


WASHINGTON,  D.  C.,  Thursday,  February  30, 1896. 
The  committee  met  at  10.30  a.  m. 
Present,  Senators  Gear  (chairman),  Stewart,  and  Morgan. 

THE  CENTRAL  PACIFIC. 
EXAMINATION  OF  MR.  C.  P.  HUNTINGTON— Continued. 

Senator  MORGAN.  It  is  impossible  for  me  to  conduct  Mr.  Huntington's 
examination  in  proper  consecutive  order  without  going  over  matter 
which  has  perhaps  been  thoroughly  explained,  until  I  can  have  access 
to  the  printed  report  of  the  stenographer  as  to  what  has  been  already 
testified  to;  but,  preparing  for  the  proper  and  consecutive  order  of  the 
examination,  I  will  take  up  at  this  point  another  branch  of  it,  and 
when  I  get  the  printed  matter  I  will  continue  the  examination  of  Mr. 
Huntington  in  the  consecutive  order  which  I  have  undertaken  to  follow. 

I  will  ask  you,  preliminarily,  Mr.  Huiitmgtou,  to  state  as  nearly  as  you 
can  the  exact  amount  of  stock  which  you  now  own  in  the  Central  Pacific 
Eailroad. 

Mr.  HUNTINGTON.  I  stated,  I  think,  that  I  owned  over  6,000  shares. 

Senator  MORGAN.  Representing  in  face  value  over  $600,000? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  is  the  largest  amount  of  stock  in  that  rail- 
road which  you  have  ever  owned? 


GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  209 

Mr.  HUNTINGTON.  I  do  not  know  that  I  have  ever  owned  more  than 
that.  I  had  an  interest  in  the  Contract  and  Finance  Company. 

Senator  MORGAN.  You  do  not  think  that  you  have  ever  personally 
owned  more  than  $600,000  of  this  stock? 

Mr.  HUNTINGTON.  I  never  had  more  than  that  standing  in  my  own 
name.  I  am  not  prepared  to  say  that  I  had  ever  so  much  as  that. 

Senator  MORGAN.  What  was  the  largest  amount  you  owned  at  any 
time,  or  that  you  had  a  right  to,  as  a  member  of  the  Contract  and 
Finance  Company? 

Mr.  HUNTINGTON.  I  do  not  know.  Mr.  Hopkins  kept  all  those 
accounts ;  he  was  the  bookkeeper  of  the  concern,  and  whatever  he  said 
always  went  with  me.  I  never  saw  the  books  of  the  Contract  and 
Finance  Company. 

Senator  MORGAN.  Were  all  the  memoranda  of  the  ownership  of  the 
stock  and  the  distribution  of  the  stock  of  each  stockholder  in  the  Con- 
tract and  Finance  Company  kept  on  the  books  of  that  company? 

Mr.  HUNTINGTON.  I  think  so.  The  Central  Pacific  stock  was  sold 
largely,  and  the  debts  of  the  Contract  and  Finance  Company  were  paid 
out  of  the  proceeds  of  the  sale,  so  that  it  did  not  really  come  into  my 
hands. 

Senator  MORGAN.  Was  there  ever  any  distribution  of  the  assets  of 
the  Contract  and  Finance  Company? 
Mr.  HUNTINGTON.  Yes. 
Senator  MORGAN.  When  was  that  made? 

Mr.  HUNTINGTON.  I  do  not  recollect  the  date.  I  should  say  along  in 
the  seventies. 

Senator  MORGAN.  Did  that  include  a  distribution  of  the  bonds  and 
stock  of  the  Central  Pacific  Company? 

Mr.  HUNTINGTON.  There  was  no  distribution.  They  were  sold  to  pay 
the  debts  of  the  Contract  and  Finance  Company,  which  debts  were 
incurred,  according  to  my  recollection,  by  the  building  of  the  Central 
Pacific  road. 

Senator  MORGAN.  And  out  of  their  sale  the  Contract  and  Finance 
Company  paid  its  debts  ? 
Mr.  HUNTINGTON.  Yes. 
Senator  MORGAN.  About  how  much  ? 

Mr.  HUNTINGTON.  It  is  a  long  way  back,  and  so  many  things  have 
come  on  since.  When  a  matter  is  settled  I  have  always  allowed  it  to 
drop  out  of  my  mind. 

Senator  MORGAN.  Can  you  not  make  an  approximate  statement? 
State  according  to  the  best  of  your  recollection. 

Mr.  HUNTINGTON.  I  do  not  recollect.  As  I  said,  Mr.  Hopkins 
always  attended  to  those  matters  as  long  as  he  lived,  and  I  had  very 
little  to  do  with  the  accounting.  I  had  great  confidence  in  Mr.  Hop- 
kins. He  did  the  bookeeping  and  handled  all  the  money. 

Senator  MORGAN.  You  were  careful  to  get  what  was  coming  to  you 
out  of  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  Whatever  Mark  Hopkins  said  was  mine  I  never 
looked  into  any  farther. 

Senator  MORGAN.  You  got  what  he  said  was  yours? 
Mr.  HUNTINGTON.  I  have  no  doubt  I  did.    I  do  not  recollect  ever 
refusing  anything. 

Senator  MORGAN.  Was  the  sum  so  inconsiderable  that  you  paid  no 
attention  to  it? 

Mr.  HUNTINGTON.  No;  I  think  not. 
Senator  MORGAN.  Was  it  not  a  very  large  sum! 
p  R 14 


210  GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  No;  after  paying  the  debts  of  the  Contract  and 
Finance  Company,  I  do  not  think  it  was  very  large. 

Senator  MOIIG-AN.  Did  it  amount  up  to  the  millions? 

Mr.  HUNTINGTON.  It  may  have  been,  perhaps,  more  than  two  or  three 
millions,  altogether. 

Senator  MORGAN.  Was  it  in  money,  stocks,  or  bonds? 

Mr.  HUNTINGTON.  It  must  have  been  money.  I  do  not  think  I  ever 
owned  200,000  of  the  bonds  of  the  Central  Pacific,  and  I  never  owned 
but  one  of  the  Government  bonds.  I  would  not  swear  positively  that 
I  ever  owned  a  Central  Pacific  first-mortgage  bond.  They  were  sold, 
and  I  sold  them,  but  not  as  my  own.  The  money  was  taken  to  pay  the 
current  bills,  and,  later  on,  the  debts  of  the  company. 

Senator  MORGAN.  Can  you  refresh  your  mind  by  any  means  to  show 
how  much  you  got  out  of  this  division  from  the  Contract  and  Finance 
Company  after  its  accounts  were  settled  ? 

Mr.  HUNTINGTON.  These  accounts  were  settled,  I  think,  perhaps 
twenty  years  ago,  and  it  has  been  the  habit  of  my  life  to  carry  things 
currently  in  my  head  while  they  are  going  on,  and  when  a  thing  is  fin- 
ished to  drop  it  out  of  my  mind.  I  could  not  keep  both  the  old  and 
the  new 5  and  the  new  seemed  necessary  to  keep. 

Senator  MORGAN.  You  gave  a  deposition  before  this  United  States 
Pacific  Eailroad  Commission  of  which  Mr.  Littler  was  president? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Have  you  ever  examined  that  deposition  since? 

Mr.  HUNTINGTON.  I  do  not  think  I  have. 

Senator  MORGAN.  Did  they  get  it  all  down  right  there? 

Mr.  HUNTINGTON.  I  do  not  know.  I  do  not  think  I  ever  saw  it.  If 
I  signed  it  I  probably  read  it  over. 

Senator  MORGAN.  You  examined  the  report  of  the  majority  of  that 
commission  ? 

Mr.  HUNTINGTON.  I  suppose  so. 

Senator  MORGAN.  And  of  the  minority,  too. 

Mr.  HUNTINGTON.  I  do  not  think  I  did;  it  is  possible  that  I  did. 

Senator  MORGAN.  There  was  a  report  by  Mr.  E.  Ellery  Anderson  and 
D.  E.  Littler,  commissioners  on  the  part  of  the  majority,  and  by  Gov- 
ernor Pattison  on  the  part  of  the  minority.  I  suppose  you  have  read 
Pattison's  report? 

Mr.  HUNTINGTON.  No;  I  do  not  think  I  ever  did.  As  I  understand 
it,  he  copied  the  Sam.  Brannan  complaint.  I  do  not  believe  1  ever 
read  it. 

Senator  MORGAN.  Then  you  do  not  know  whether  Governor  Pattison 
copied  the  Sam.  Braunan  complaint  or  not,  only  from  common  report? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  That  would  be  hardly  a  proper  way  to  treat  the 
report  of  a  sworn  commission. 

Mr.  HUNTINGTON.  It  depends  upon  who  the  commissioners  were. 

Senator  MORGAN.  If  they  were^  such  men  as  Pattison  would  you 
think  it  a  fair  way  to  treat  their  re'port? 

Mr.  HUNTINGTON.  I  do  not  know.  I  do  not  know  enough  about 
Pattison  to  wish  to  speak  about  him. 

Senator  MORGAN.  Did  you  never  examine  the  majority  report? 

Mr  HUNTINGTON.  I  do  not  know  whether  I  ever  read  it  j  I  may  have 
read  it. 

Senator  MORGAN.  Before  you  get  rid  of  this  examination  I  will  ask 
you  to  pay  very  special  attention  to  the  report  of  the  majority  and  also 
of  the  minority,  J  want  to  see  whether  or  not  these  gentlemen  have 


GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS.  211 

misrepresented  you.  If  they  have,  it  is  important  for  you  to  read  their 
reports  and  correct  them. 

Mr.  HUNTINGTON.  I  am  glad,  Senator,  to  see  that  you  are  looking 
out  somewhat  for  my  interest. 

Senator  MORGAN.  I  am  looking  out  for  the  interest  of  everybody 
concerned.  I  have  no  reason  to  be  partial.  I  have  no  interest  for  you 
and  none  against  you.  You  know  that. 

Mr.  HUNTINGTON.  I  should  hope  so. 

Senator  MORGAN.  And  I  live  in  a  State  which  has  not  one  stiver  of 
interest  in  this  controversy — which  will  be  neither  benefited  by  your 
successes  nor  injured  by  your  disappointments. 

Mr.  HUNTINGTON.  That  is  a  good  thing.  We  all  have  an  interest  in 
the  right  and  the  wrong,  and  I  suppose  that  the  State  of  Alabama  has 
also. 

Senator  MORGAN.  Therefore,  in  my  investigation  of  this  subject,  1 
am  trying  to  act  impartially  as  a  member  of  this  committee,  which 
wants  to  get  at  the  truth  and  nothing  else.  I  hope  that  all  the  facts 
which  can  be  shown  in  your  favor  will  be  shown.  I  will  not  try  to 
suppress  them. 

Mr.  HUNTINGTON.  I  do  not  believe  you  would. 

Senator  MORGAN.  I  want  to  ask  you  about  some  points  in  this  report 
this  morning  with  the  view  of  getting  at  facts.  This  book  that  I  hold 
in  my  hand  is  volume  2,  Senate  Executive  Document,  first  session,  Fif- 
tieth Congress.  I  read  from  page  70.  Is  this  a  true  statement: 

About  the  time  of  the  completion  of  the  construction  of  the  thirty-first  section 
the  act  of  July  2,  1864,  was  passed.  Under  this  act  the  donations  to  the  company 
were  vastly  increased  and  it  was  authorized  to  mortgage  the  railroad  for  an  amount 
equal  to  the  Government  aid  and  to  give  such  mortgage  a  priority  of  lien.  Messrs. 
Stanford,  Huntingtou,  Hopkins,  and  Crocker  were  at  this  time  directors  of  the  Cen- 
tral Pacific  and  had  absolute  control  of  its  affairs. 

Is  that  right? 

Mr.  HUNTINGTON.  We  were  directors,  I  think.  I  am  not  sure  about 
Mr.  Crocker ;  but  I  am  pretty  sure  that  I  was  a  director.  In  fact,  I 
know  I  was,  and  I  am  sure  that  Stanford  and  Hopkins  were. 

Senator  MORGAN.  The  main  point  is  that  you  had  absolute  control  of 
its  affairs.  Is  that  true? 

Mr.  HUNTINGTON.  No;  I  would  not  be  prepared  to  say  that  it  was 
true.  I  think  that  the  directors  consisted  of  nine  or  seven.  We  had 
the  largest  interest.  You  may  say  we  did  control.  Perhaps  it  would 
be  proper  to  say  that  we  actually  could  control.  If  we  were  four,  and 
the  board  consisted  of  seven  members,  why,  we  had  control.  If  tv> 
board  consisted  of  seven  members,  and  we  were  but  three,  we  could 
hardly  be  said  to  control  the  board. 

Senator  MORGAN.  If  there  were  nine  directors,  five  being  the  major- 
ity to  control,  you  still  did  control  it. 

Mr.  HUNTINGTON.  What  we  said  would  have  gone.  We  were  the 
active  men  who  were  putting  all  our  power  into  it. 

Senator  MORGAN.  The  commissioners  say  further: 

The  board  numbered  nine.  The  other  members  were  James  Bailey,  T.  D.  Judah, 
L,  A.  Booth,  D.  W.  Strong,  and  Charles  Marsh,  who  were  entirely  under  the  control 
of  the  four  persons  named  above. 

Is  that  true? 

Mr.  HUNTINGTON.  ISTo;  Lucius  A.  Booth  was  one  of  the  best  men  in 
California,  as  independent  as  we  were.  Charles  Marsh  was  a  good 
man  and  a  wealthy  man.  He  was  a  good  miner  and  engineer.  Dr. 
Strong  was  a  good  man.  I  do  not  think  he  had  any  great  deal  o>i 


212  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

money.  James  Bailey  was  a  man  of  means.  Mr.  Judah  had  less  money. 
He  was  a  man  that  I  had  talked  about  as  engineer.  They  were  all  men 
of  prominence  in  California,  and  men  who  were  not  controlled  by  any 
one,  I  guess,  but  themselves.  They  were  all  good  men. 

Senator  MORGAN.  Were  they  still  entirely  under  the  control  of  the 
four  persons  named  above? 

Mr.  HUNTINGTON.  No ;  they  were  not. 

Senator  MORGAN.  But  what  the  four  persons  named  above  said  went? 

Mr.  HUNTINGTON.  I  think  it  would  have  been  likely  to  go  because 
they  were  putting  money  in  pretty  largely.  What  we  recommended 
would  have  been  pretty  likely  to  be  acquiesced  in,  but  not  unless  it  met 
with  their  judgment  and  approval  as  a  thing  that  ought  to  be  done. 

Senator  MORGAN.  They  say  that  "on  the  24th  of  December,  1862, 
Charles  Crocker  resigned  and  voted  to  award  the  contract  to  five 
directors.  This  was  the  contract  that  was  completed  in  March,  186G?" 

Mr.  HUNTINGTON.  I  should  think  very  likely  that  it  was. 

Senator  MORGAN.  Were  you  a  member  of  that  Charles  Crocker  & 
Co.'s  construction  company! 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Had  you  no  interest  in  it? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  This  contract,  the  commissioners  say,  could  not  be 
found. 

Mr.  HUNTINGTON.  I  was  there  when  that  contract  was  let.  I  think 
I  was  there  when  the  first  seven  contracts  were  let.  I  am  quite  sure 
that  is  one  of  the  contracts  that  were  let  to  build  the  road  from  Sacra- 
mento to  Newcastle,  31£  miles. 

Senator  MORGAN.  The  commissioners  then  proceed  to  give  a  very 
detailed  account  of  each  of  the  contracts  that  was  made  to  different 
persons;  and  they  set  out  the  testimony  of  several  witnesses  to  show 
what  these  contracts  were  and  what  work  was  done  under  them,  and 
they  proceeded  as  follows : 

Leland  Stanford  testified  that  Charles  Crocker  had  110  partners,  but  it  appears 
from  his  own  evidence  (vol.  5,  p.  2637)  that  all  of  the  stock  received  by  Charles 
Crocker  under  these  contracts  was  turned  over  to  the  corporation  known  as  the  Con- 
tract and  Finance  Company,  in  which  Stanford,  Huntingtou,  Hopkins,  and  Crocker 
were  substantially  the  sole  stockholders. 

Is  that  correct j  is  that  true? 

Mr.  HUNTINGTON.  They  may  have  been  turned  over.  Mr.  Crocker 
did  not  complete  that  contract.  He  could  not  get  any  partners.  I 
worked  very  hard  to  get  them  myself  in  California,  New  York,  and 
Boston,  but  the  capitalists  that  I  spoke  to  said  they  would  not  go  into 
an  open  copartnership  and  be  responsible  as  individuals  for  large 
amounts.  So  it  suggested  itself  to  me  that  they  had  better  organize 
some  company  where  a  man  would  know  what  his  responsibility  was 
if  he  took  any  stock  in  it.  I  am  very  certain  that  Crocker  did  not 
finish  his  contract.  That  contract  was  to  build  from  Newcastle  to 
Camp  127  or  128,  some  100  miles  of  the  most  expensive  part  of  the 
road,  and  I  think  perhaps  that  he  did  turn  it  in.  The  Contract  and 
Finance  Company  took  the  work  up,  and  he  turned  it  over  to  that  com- 
pany. I  can  not  say  that  that  was  so,  but  it  is  my  impression  that  it 
was  so. 

Senator  MORGAN.  Where  was  this  Contract  and  Finance  Company 
chartered? 

Mr.  HUNTINGTON.  It  was  chartered  under  a  statute  of  California. 

Senator  MORGAN.  The  commissioners  proceed  to  say: 

The  amount  of  stock  so  turned  over  was  about  $14,000,000. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  218 

Mr.  HUNTINGDON.  They  could  not  guess  anything  about  it. 
Senator  MORGAN.  You  can  not  deny  that  statement"? 
Mr.  HUNTINGTON.  I  can  not  deny  it  or  affirm  it 5  I  do  not  know  that 
I  ever  heard  the  figures  before. 
Senator  MORGAN.  The  commissioners  go  on  to  say: 

It  is  clearly  established  by  tbe  evidence  that  these  four  gentlemen  wore  at  all 
times  equally  interested  in  the  results  of  these  contracts,  and  that,  whether  the 
formal  relation  of  partners  existed  between  them  or  not,  it  was  understood  and 
agreed  between  them  that  they  should  share  equally  in  all  the  profits  of  the  enter- 
prise. 

Is  that  true  ? 

Mr.  HUNTINGTON.  No;  I  do  not  think  there  was  any  such  agreement 
as  that.  I  had  an  interest  in  the  Contract  and  Finance  Company.  I 
have  no  doubt  about  that.  I  recollect  now  (after  refreshing  my  mind) 
that  when  Mr.  Hopkins  telegraphed  me  at  Boston  about  taking  stock 
in  the  Contract  and  Finance  Company,  I  sent  him  a  dispatch  in  these 
words :  "  Take  as  little  as  you  can  and  as  much  as  you  must."  A  queer 
wording,  perhaps,  but  that  happens  to  flash  across  my  mind  now.  We 
were  in  dead  earnest  about  building  the  road. 

Senator  MORGAN.  "Take  as  little  as  you  can"  of  what? 

Mr.  HUNTINGTON.  Of  the  stock  of  the  Contract  and  Finance  Com- 
pany. We  were  always  in  hope  of  getting  others  in  to  take  stock. 

Senator  MORGAN.  You  did  not  get  anybody  in? 

Mr.  HUNTINGTON.  Not  here.  We  did  not  get  any  great  capitalists 
in.  I  spent  probably  one  hundred  nights  in  New  York  and  Boston 
discussing  the  matter  with  rich  men. 

Senator  MORGAN.  The  commissioners  proceed  to  say: 

The  contract  was  awarded  by  the  votes  of  Crocker  &  Co.  to  Crocker  &,  Co. 

Mr.  HUNTINGTON.  The  record  would  show  that.  1  should  have  voted 
for  it  if  I  had  been  there  5  but  my  impression  is  that  I  was  not.  If  I 
had  been  I  should  have  voted  for  the  contract. 

Senator  MORGAN  (reading). 

The  profits  arising  out  of  these  contracts  were  divided  among  these  four  persons; 
and  this  same  singular  feature  will  be  found  to  pervade  all  contracts  for  construc- 
tion, for  repairs,  for  branch  lines,  for  leases  of  the  auxiliary  lines,  for  the  express 
business,  for  the  sale  of  material,  and  for  the  sale  of  coal ;  as  to  all  of  which,  through 
the  intervention  of  construction  companies,  express  companies,  or  development  com- 
panies (in  which  these  four  persons  were  substantially  the  only  stockholders),  all  of 
the  contracts  have  been  awarded  by  the  votes  of  Stanford,  Huntiiigtou,  Hopkins,  and 
Crocker. 

Mr.  HUNTINGTON.  We  were  the  parties  who  stood  in  all  the  time  and 
did  what  we  had  to  do.  I  was  unfortunate  in  not  getting  other  people  in. 

Senator  MORGAN.  Have  you  any  facts  to  state  in  contravention  of 
the  statement  made  by  the  commissioners  which  I  have  just  read? 

Mr.  HUNTINGTON.  I  do  not  think  there  was  any  distribution  made  at 
all.  We  kept  everything,  as  I  understand,  and  we  had  to  go  on  with 
the  work.  That  is  what  was  the  matter.  We  could  not  get  anyone  in 
with  us  that  we  wished  to  get  in.  I  labored  almost  day  and  night  for 
seven  years,  back  and  forth.  I  would  go  to  California  and  stay  there 
ten  days,  and  then  I  would  come  back  to  New  York  and  be  gone  only 
thirty  days,  during  which  time  I  would  have  made  1,400  miles  of  stages 
and  stayed  ten  days  in  California. 

Senator  MORGAN.  The  commissioners  proceed  to  state  some  deduc- 
tions or  conclusions  from  the  facts  which  they  have  recited  in  their 
report.  They  say,  on  page  72  of  this  volume : 

In  the  opinion  of  the  commission,  the  course  pursued  in  this  respect  is  wholly  inde 
fensible.  The  agreement  of  the  coin  pany  when  it  received  the  munificent  aid  extended. 


214  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

by  the  United  States  was  to  repay  the  loan  and  so  much  of  the  interest  ;is  had  not 
been  repaid  by  transportation  or  percentages  of  net  earnings  at  the  expiration  of 
thirty  years.  The  course  pursued  by  Stanford,  Huntington,  Hopkins,  and  Crocker 
was  necessarily  absolutely  destructive  of  any  possible  security.  This  result  will 
appear  more  clearly  as  the  detail  of  the  contracts  effected  is  developed. 

Mr.  HUNTINGTON.  Well  now,  in  a  general  way,  if  Senator  Morgan 
will  allow  me — 

Senator  MORGAN.  You  are  at  liberty  to  say  what  you  want. 

Mr.  HUNTINGTON.  The  road  was  built  on  $44,000,000  of  assets,  and  I 
do  not  believe  that  any  other  set  of  men  in  the  world  could  have  got 
through  without  bankruptcy,  because  I  do  not  think  that  any  other  set 
of  men  would  have  put  in  the  days  and  nights  on  the  work  which  I  did; 
and  if  I  had  not  had  good  credit  wre  never  would  have  made  the  land- 
ing and  never  would  have  completed  the  road.  I  know  that  almost  as 
well  as  I  know  anything  of  that  character. 

Senator  MORGAN.  When  you  say  that  the  road  was  built  for 
$44,000,000,  do  you  mean  that  that  was  the  amount  you  had  done  it 
for;  that  is  what  the  road  cost— $44,000,000? 

Mr.  HUNTINGTON.  It  cost  more. 

Senator  MORGAN.  WThy  did  you  refer  to  putting  in  $44,000,000  of 
assets  if  that  amount  was  not  what  it  cost? 

Mr.  HUNTINGTON.  I  will  tell  you  how  I  arrive  at  it.  I  am  speaking 
about  credit  as  a  part.  We  had  $28,000,000  of  Government  bonds. 
We  sold  them  at  not  over  par — we  sold  them  at  considerably  less  than 
par.  I  think  I  sold  some  of  them  in  the  neighborhood  of  85. 

Senator  MORGAN.  Did  you  sell  them  at  rates  lower  than  the  Union 
Pacific  Company  sold  theirs? 

Mr.  HUNTINGTON.  No;  I  think  we  got  a  little  more.  We  did  not  get 
60  cents  in  gold  for  them.  It  was  the  same  also  with  the  $28,000,000  of 
first  mortgage  bonds.  We  mortgaged  our  land  for  $10,000,000,  and  if 
we  sold  those  bonds  at  par,  getting  CO  cents  in  gold  for  the  currency, 
that  would  be  $6,000,000  we  received  from  the  land-grant  bonds.  The 
capital  stock  of  $60,000,000  could  not  be  sold  at  10  cents  on  the  dollar. 
We  put  it  at  10  cents.  I  do  not  believe  it  could  have  been  sold  at  5 
cents  when  the  road  was  built.  The  Union  Pacific  shares  all  changed 
hands  (and  its  stock  stood  as  well  as  the  Central)  at  an  average  of  less 
than  8  cents  on  the  dollar.  I  was  offered  a  majority  of  the  Union 
Pacific  shares  myself  at  8  cents,  but  I  did  not  have  the  money  to  buy 
them,  and  if  I  had  I  should  not  have  bought  them.  That  figures  up 
$43,444,000.  When  we  got  through  we  could  not  commence  to  pay  the 
debts  of  the  Contract  and  Finance  Company  from  the  assets  we  had. 
We  could  not  have  come  within  millions  of  it,  but  we  carried  the  debt 
along,  and  carried  it  pretty  easily.  In  completing  the  road  I  got  money 
cheap.  I  did  not  pay  anything  like  what  the  Union  Pacific  did;  but 
after  the  road  was  built  and  the  collaterals  disposed  of,  I  had  to  bor- 
row money  at  10  per  cent.  Finally  the  time  came  when  the  Contract 
and  Finance  Company  sold  its  Central  Pacific  shares,  so  that  we  got  out 
of  debt,  and  had  something  to  the  good.  We  had  something  to  pay  us 
for  the  great  work  we  had  done;  and  if  I  had  been  offered  millions  I 
would  not  have  undertaken  the  same  contract  and  have  made  the  same 
landing  again. 

Senator  MORGAN.  Are  you  through  with  that  statement? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Let  me  see  if  I  understand  you.  Your  estimate 
is  upon  gold  values  for  all  the  things  that  you  got  at  the  time. 

Mr.  HUNTINGTON.  I  strike  an  average.    I  did  pay  122  for  a  large  lot 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  215 

of  gold.  I  strike  the  average  at  60  cents,  and  that  would  be  rather 
above  than  below  the  average. 

Senator  MORGAN.  Did  you  sell  any  of  your  Government  bonds  at  CO 
cents  on  the  dollar  for  gold? 

Mr.  HUNTINGTON.  I  did  not  sell  them  for  gold  at  all.  I  sold  them  for 
currency;  and  it  is  certain  that  I  sold  some  of  them  at  85  for  currency. 
They  were  a  new  thing  and  nobody  seemed  to  want  them. 

Senator  MORGAN.  You  are  speaking  of  the  Government  bonds? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  about  the  company's  first  mortgage  bonds? 

Mr.  HUNTINGTON.  We  sold  them  for  currency,  and  bought  gold. 
We  paid  for  our  rails  and  engines  in  currency;  but  all  the  work  was 
done  in  California,  and  had  to  be  paid  for  in  gold.  Not  a  cent  of  cur- 
rency appeared  anywhere  in  our  transactions  there. 

Senator  MORGAN.  Why  did  you  sell  these  bonds  for  currency? 

Mr.  HUNTINGTON.  Because  that  is  what  we  took.  We  said  that  we 
would  take  so  many  dollars,  and  they  paid  us  in  currency,  of  course. 

Senator  MORGAN.  Who  paid  you? 

Mr.  HUNTINGTON.  The  people  who  bought  the  bonds;  A,  B,  and  0. 
We  did  not  mention  gold.  When  we  wanted  gold  we  bought  it.  Cur- 
rency was  not  used  in  California  at  all.  Gold  was  the  currency  of  the 
State. 

Senator  MORGAN.  So  that  in  Calfornia  what  payments  you  made  for 
materials  and  labor  were  made  in  gold? 

Mr.  HUNTINGTON.  On  what  part  of  the  road? 

Senator  MORGAN.  On  the  road  down  as  far  as  Ogden. 

Mr.  HUNTINGTON.  Yes;  that  is  my  recollection. 

Senator  MORGAN.  You  did  not  use  currency  at  all? 

Mr.  HUNTINGTON.  I  do  not  think  we  paid  any  currency.  So  many 
dollars  there  meant  so  many  dollars  in  gold. 

Senator  MORGAN.  What  were  the  United  States  bonds  worth  at  that 
time  in  gold? 

Mr.  HUNTINGTON.  A  man  in  Berlin  told  me  the  other  day  that  he 
bought  some  Government  bonds  at  that  time  for  36;  that  is,  they  cost 
him  36.  When  we  first  got  our  subsidy  bonds  nobody  knew  what  to  do 
with  them.  They  did  not  take  them  for  currency. 

Senator  MORGAN.  What  debts  of  the  Central  Pacific  Company  were 
outstanding  at  the  time  of  the  completion  of  the  road,  aside  from  its 
bonded  debt? 

Mr.  HUNTINGTON.  My  impression  is,  not  much.  The  Contract  and 
Finance  Company  carried  the  burden. 

Senator  MORGAN.  The  Central  Pacific  Company  proper  did  not  really 
owe  any  debts  at  the  time  of  the  completion  of  the  road  except  the  debt 
to  the  United  States  Government  and  to  the  first-mortgage  bondholders. 

Mr.  HUNTINGTON.  That  is  one  way  to  put  it.  The  Contract  and 
Finance  Company  agreed  to  build  the  road'. 

Senator  MORGAN.  But  did  the  two  companies  have  separate  estab- 
lishments; or,  if  they  were  just  the  same,  I  want  to  get  at  that  fact? 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  contracted, 
as  I  understand  and  believe,  to  build  the  road  for  so  much  stock  and 
so  much  bonds  (which  were  all  the  bonds),  and  when  the  Central  Paci- 
fic Company  paid  the  interest  on  their  bonds  that  was  their  pay,  and 
the  business  of  the  Contract  and  Finance  Company  was  to  build  the 
road  as  per  contract. 

Senator  MORGAN.  You  seem  to  identify  the  Contract  and  Finance 
Company  with  the  Central  Pacific. 


216  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  do  not  know  why.  In  making  the  contract  the 
Contract  and  Finance  Company  had  half  of  the  trade  and  the  Central 
Pacific  had  the  other  half.  The  Central  Pacific  had  the  contract  to  take 
care  of  the  bonds  and  the  Contract  and  Finance  Company  to  build 
the  road. 

Senator  MORGAN.  Then  the  debts  which  you  speak  of  as  being  out- 
standing at  the  time  of  completing  the  Central  Pacific  road  between  a 
point  within  5  miles  of  Ogden  and  its  western  terminus  were  debts 
which  wrere  owing  by  the  Contract  and  Finance  Company. 

Mr.  HUNTINGTON.  I  do  not  see  how  it  could  be  otherwise,  if  I  am 
correct  in  my  construction,  as  I  believe  I  am. 

Senator  MORGAN.  I  do  not  think  we  have  any  difficulty  about 
that. 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  contracted 
with  the  Central  Pacific  to  do  a  certain  work,  for  which  the  Central 
Pacific  gave  certain  amounts  from  time  to  time  as  the  work  went  on. 

Senator  MORGAN.  But,  as  between  the  Central  Pacific  and  its  stock- 
holders, and  as  between  the  Government  of  the  United  States  and  the 
Central  Pacific,  the  Central  Pacific  Company  at  the  time  of  its  comple- 
tion was  out  of  debt,  excepting  for  its  first-mortgage  bonds'? 

Mr.  HUNTINGTON.  I  do  not  recollect.  That  is  thirty  years  ago.  The 
Contract  and  Finance  Company  may  have  finished  the  work  at  the 
eastern  end  of  the  road,  and  still  there  may  have  been  many  things 
to  be  done. 

Senator  MORGAN.  If  there  was  any  debt  resting  against  the  Central 
Pacific  at  the  time  of  its  completion,  state  what  it  was  and  the  amount. 

Mr.  HUNTINGTON.  I  do  not  know  that  there  was  any  debt,  but  there 
may  have  been.  The  Contract  and  Finance  Company  agreed  to  build 
the  road  in  certain  ways,  and  I  presume  it  did  so  and  finished  the  con- 
tract. I  mean  to  say  that  it  was  not  a  continuing  contract  to  keep  the 
road  up  forever;  but  the  road  had  to  be  accepted  by  the  Government 
officials,  and  when  it  was  accepted  that  closed  that  section  of  the  road 
up,  as  between  the  Contract  and  Finance  Company  and  the  Central 
Pacific.  After  that  the  Central  Pacific  Company  may  have  wanted 
more  rolling  stock,  and  it  may  not  have.  But  when  the  Government 
accepted  a  section  of  the  road  the  business  on  that  section  was  closed 
as  between  the  Central  Pacific  and  the  Contract  and  Finance  Company. 
After  that  whatever  was  needed  to  be  done — for  instance,  if  there  came 
a  great  freshet  and  washed  away  a  bridge — in  fact  the  American  bridge 
was  burned  up 

Senator  MORGAN.  Then  the  Central  Pacific  had  to  keep  it  up? 

Mr.  HUNTINGTON.  I  do  not  know  who  else  there  was  to  do  it. 

The  CHAIRMAN.  Was  the  Central  Pacific  a  completed  road,  ballasted, 
etc.,  by  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  No. 

The  CHAIRMAN.  It  was  just  completed  so  far  as  building  the  track 
and  laying  the  rails'? 

Mr.  HUNTINGTON.  Yes;  the  Government  was  to  accept  the  road, 
and  it  was  ballasted  just  as  all  roads  are  ballasted,  with  the  best  mate- 
rial at  hand. 

The  CHAIRMAN.  Was  that  a  part  of  the  contract  f 

Mr.  HUNTINGTON.  It  was  not  a  part  of  the  contract  to  ballast  the 
road  except  with  the  materials  that  we  had  at  hand. 

The  CHAIRMAN.  You  put  in  the  ballast  that  the  country  afforded? 

Mr.  HUNTINGTON.  Yes;  now  we  haul  the  ballast  sometimes  a  hun- 
dred miles,  but  we  could  not  do  that  when  we  were  building  the  road. 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS.          217 

We  agreed  to  build  such  a  road  as  the  Government  would  accept,  and 
it  was  a  good  road. 

Senator  MORGAN.  At  the  time  of  the  completion  of  the  Central 
Pacific  road  in  the  manner  you  have  described,  how  much  did  the  Con- 
tract and  Finance  Company  owe? 

Mr.  HUNTINGDON.  I  do  not  know. 

Senator  MORGAN.  About  how  much  ? 

Mr.  HUNTINGTON.  I  do  not  know  how  much,  but  it  was  in  the 
millions. 

Senator  MORGAN.  Two  or  three  or  four  millions? 

Mr.  HUNTINGTON.  A  good  deal  more  than  that. 

Senator  MORGAN.  Five  or  six  or  seven  or  eight  millions? 

Mr.  HUNTINGTON.  I  can  not  say.  My  impression  is  that  the  Contract 
and  Finance  Company  owed  considerably  more  than  $10,000,000. 

Senator  MORGAN.  Has  that  all  been  paid? 

Mr.  HUNTINGTON.  It  has  been  all  paid. 

Senator  MORGAN.  How  ? 

Mr.  HUNTINGTON.  By  selling  what  we  had  to  sell;  but  mostly  shares 
of  the  Central  Pacific. 

Senator  MORGAN.  You  held  on  to  the  bonds  of  the  Central  Pacific 
and  sold  its  shares? 

Mr.  HUNTINGTON.  We  sold  bonds  currently.  We  had  no  bonds 
except  perhaps  some  few  land  grant  bonds.  I  do  not  think  we  had  a 
Government  bond  or  first  mortgage  bond  when  the  road  was  completed, 
but  we  may  have  had  a  few.  I  am  very  certain,  however,  that  I  never 
owned  a  Government  bond  which  the  Central  Pacific  received  from  the 
Government,  and  I  have  no  recollection  positively  of  owning  any  first- 
mortgage  bonds  of  the  company,  but  I  think  I  did.  I  think  I  took 
some  of  them  from  the  Contract  and  Finance  Company. 

Senator  MORGAN.  Estimating  that  the  debt  of  the  Contract  and 
Finance  Company  at  the  time  of  the  completion  of  the  Central  Pacific 
road  amounted  to  $10,000,000  and  that  you  paid  it,  and  paid  it  mostly 
in  cash 

Mr.  HUNTINGTON.  I  paid  it  in  cash.    We  sold  the  shares. 

Senator  MORGAN.  What  shares,  and  to  whom  did  they  belong? 

Mr.  HUNTINGTON.  They  belonged  to  tfie  Contract  and  Finance 
Company. 

Senator  MORGAN.  What  shares  we're  they? 

Mr.  HUNTINGTON.  Shares  of  the  Central  Pacific  Company. 

Senator  MORGAN.  Estimating  the  debt  of  the  Contract  and  Finance 
Company  at  $10,000,000,  how  many  shares  of  the  Central  Pacific  did  you 
have  to  sell  in  order  to  raise  that  amount? 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  had  some  fifty 
odd  millions  in  shares  of  the  Central  Pacific  stock. 

Senator  MORGAN.  How  much  did  you  sell  of  those  shares? 

Mr.  HUNTINGTON.  I  can  not  say  exactly.  In  the  neighborhood  of 
half  of  them. 

Senator  MORGAN.  Then  you  sold  in  the  neighborhood  of  $25,000,000 
of  the  shares  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  these  you  sold  at  about  50  cents  on  the  dollar? 

Mr.  HUNTINGTON.  We  sold  those  shares,  I  think,  all  the  way  as  high 
as  85  and  as  low  as  19. 

Senator  MORGAN.  Then,  after  you  got  through  selling  shares  and 
paying  up  this  $10,000,000  of  debt  you  still  had  shares  of  the  Central 
Pacific  to  divide? 


218  GOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGDON.  No;  I  think  they  were  all  sold. 

Senator  MORGAN.  You  had  money  to  divide? 

Mr.  HUNTINGTON.  It  was  money,  I  think. 

Senator  MORGAN.  You  do  not  know  how  much? 

Mr.  HUNTINGTON.  No;  I  do  not  know. 

Senator  MORGAN.  The  books  of  the  company  are  not  in  existence, 
and  you  can  not  find  out1? 

Mr.  UUNTINGTON.  No;  the  books  of  the  company  are  not  in  existence. 
I  would  like  very  much,  Senator,  that  you  could  look  them  over. 

Senator  MORGAN.  1  would  not  like  it.  I  do  not  like  to  investigate 
things  which  are  of  no  more  importance.  I  do  not  like  to  investigate 
the  grave,  either  for  events  or  things,  for  the  purpose  of  satisfying  my 
curiosity. 

Mr.  HUNTINGTON.  I  never  have  disturbed  myself  much  about 
yesterday  or  to-morrow. 

Senator  MORGAN.  I  do  not  think  you  have.  I  will  go  back  to  the 
report  of  the  United  States  Pacific  Railroad  Commissioners  in  order  to 
give  you  an  opportunity  to  explain  things.  On  page  72  they  say: 

The  railroad  was  constructed  between  section  138  and  Promontory  Point  by  a  cor- 
poration know  as  the  Contract  and  Finance  Company.  That  company  was  formed 
ostensibly  for  the  purpose  of  inviting  the  cooperation  of  outside  capital.  It  was 
alleged  that  the  personal  liability  which  attached,  under  the  laws  of  California,  to 
the  ownership  of  the  stock  of  the  Central  Pacific  deterred  many  persons  from  tak- 
ing any  part  in  the  enterprise;  and  the  object  of  forming  the  Contract  and  Finance 
Company  seems  to  have  been  to  obviate  that  difficulty  by  causing  the  construction 
to  be  done  through  that  company.  (See  evidence  of  Huntington,  vol.  1,  p.  10;  Stan- 
ford, vol.  5,  p.  2624.)  That  company  was  formed  in  1867.  Its  capital  stock  was 
$5,000,000.  This  stock  was  divided  into  three  equal  shares,  which  were  issued  to 
William  E.  Brown,  T.  J.  Milliken,  and  B.  R.  Crocker.  The  stock  so  taken  was  under- 
stood by  the  iucorporators  to  be  held  for  Stanford,  Huntington,  Hopkins,  Charles 
Crocker,  and  E.  B.  Crocker,  and  the  three  incorporators  who  became  the  managers 
of  the  company  represented  these  five  persons. 

Do  you  dissent  from  that  statement  in  any  particular  as  a  matter  of 
fact? 

Mr.  HUNTINGTON.  I  do  not  think  that  I  ever  heard  that  these  people 
were  shareholders.  If  I  heard  they  were,  it  has  gone  entirely  out  of 
my  mind.  I  was  in  New  York  nearly  all  the  time. 

Senator  MORGAN  (reading). 

Subsequently  E.  B.  Crocker's  interest  was  assigned  to  the  other  four  parties  in 
interest,  so  that  they  each  owned  a  quarter  interest  in  the  Contract  and  Finance 
Company.  (See  evidence  of  Stanford,  vol.  5,  p.  2638.) 

Mr.  HUNTINGTON.  Stanford  understood  it  thoroughly.  I  knew  E.B. 
Crocker.  He  was  a  worthy  citizen ;  but  if  I  ever  did  know  that  he  had 
an  interest  in  the  Contract  and  Finance  Company,  it  has  gone  out  of 
my  mind. 

Senator  MORGAN  (reading). 

In  December,  1867,  a  contract  was  submitted  by  Leland  Stanford  to  the  board  of 
directors  of  the  Central  Pacific  Company,  on  behalf  of  the  Contract  and  Finance  Com- 
pany, to  construct  the  road  from  section  138  to  Promontory  Point.  There  were  pres- 
ent at  that  meeting  Stanford,  E.  B.  Crocker,  Mark  Hopkins,  and  E.  H.  Miller,  jr. 
The  board  accepted  the  contract  on  the  terms  proposed.  (See  evidence  of  E.  H. 
Miller,  jr.,  vol.  5,  p.  3062. )  The  terms  of  the  contract  were  substantially  $86,000  per 
mile,  one-half  payable  in  cash,  the  other  half  payable  in  stock.  For  this  the  Con- 
tract and  Finance  Company  was  to  complete  the  road,  build  all  the  depots,  sta- 
tion houses,  turntables,  roundhouses,  furnish  all  the  equipment,  freight  shops,  and 
machinery  shops,  and  everything  necessary  to  the  running  of  the  road. 

Is  that  right? 

Mr.  HUNTINGTON.  Some  of  it  is  new  to  me;  but  in  a  general  way  it 
is  right.  About  the  cash  part,  I  had  forgotten  about  that;  but  no 
doubt  it  is  correct.  These  bonds  must  have  been  sold,  and  that  is  the 


JOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS. 


219 


way  the  money  was  raised  to  pay  the  cash  that  was  paid.  As  far  as  I 
recollect,  I  should  have  said  that  the  Contract  and  Finance  Company 
agreed  to  build  the  roads  for  the  bonds  and  stock;  but  if  Governor 
Stanford  says  it  was  so,  I  have  no  doubt  it  was  so. 

Senator  MORGAN.  The  sales  of  bonds  that  were  made — were  they 
made  by  the  Contract  and  Finance  Company  or  by  the  Central  Pacific 
Company? 

Mr.  HUNTINGTON.  I  sold  the  bonds  myself  and  accounted  to  the 
company. 

Senator  MORGAN.  Which  company  1 

Mr.  HUNTINGTON.  If  they  belonged  to  the  Central  Pacific,  I  accounted 
to  the  Central  Pacific  company.  The  accounting  was  made  correct; 
there  is  no  doubt  about  that.  But  I  should  have  stated,  as  I  said  before, 
that  the  contract  was  made  to  build  the  road  in  the  usual  way;  that 
is,  to  take  the  bonds  and  stock  and  to  do  the  work. 

Senator  MORGAN,  I  see  on  the  same  page: 

Under  this  contract  tho  road  was  constructed  between  the  points  indicated,  a  total 
of  552  miles,  at  a  cost  of  $23,726,000  in  stock  and  $23,726,000  in  £old.  It  is  a  noticeable 
fact  that  Mr.  Miller  testifies  that  at  tho  time  he  voted  for  this  contract  and  at  the 
time  he  voted  for  the  Crocker  contract  and  its  extension,  he  was  not  informed  that 
the  directors  of  the  Central  Pacific  were  also  beneficiaries  under  tho  contracts.  (See 
evidence  of  E.  H.  Miller,  jr.,  vol.  5,  pp.  3061,  3062.)  The  commission  has  made  dili- 
gent effort  to  ascertain  the  actual  cost  of  the  railroad  to  the  Contract  and  Finance 
Company;  and,  in  their  opinion,  have  arrived  at  a  conclusion  which  can  not  be  far 
from  the  truth.  An  accurate  answer  to  this  question  would  be  shown  by  the  books 
of  Charles  Crocker  &  Co.  and  of  the  Contract  and  Finance  Company.  These  books 
were  not  produced,  and,  in  tho  opinion  of  the  commission,  were  purposely  destroyed 
by  direction  of  Stanford,  Hunting-ton,  Hopkins,  and  Crocker.  The  evidence  on  this 
point  appears  to  be  conclusive. 

Mr.  HUNTINGTON.  Is  that  the  Pattison  report? 

Senator  MORGAN.  No;  it  is  the  report  of  the  other  two  commis- 
sioners. 

Mr.  HUNTINGTON.  I  do  not  know  anything  about  that,  but  it  is  not 
correct. 

Senator  MORGAN.  I  do  not  know  whether  it  is  or  not. 

Mr.  HUNTINGTON.  Well,  1  do. 

Senator  MORGAN.  In  what  respect  is  it  not  correct? 

Mr.  HUNTINGTON.  If  the  books  were  destroyed,  I  do  not  know  any- 
thing about  it,  but  I  do  not  think  they  were.  If  they  were  destroyed, 
they  were  either  sold  for  waste  paper  or  burned  up  without  respect  to 
that.  About  the  building  of  the  road,  nobody  in  the  world  could  know 
anything  about  the  cost  or  guess  anything  of  the  cost.  We  shoveled 
snow  in  the  mountains  there  one  winter.  We  hauled  rails  across  the 
mountains  on  sleds  to  get  down  into  the  country  where  there  was  no 
snow.  We  did  it  at  very  great  expense,  and  nobody  could  know  any- 
thing about  the  cost.  The  commissioners  could  only  get  their  informa- 
tion as  they  do  out  there  now.  Most  business  men  have  something  to 
do.  But  the  Sutro  Examiner  Combination  or  the  Examiner  Sutro  Com- 
bination (I  do  not  know  which  is  the  head  and  which  the  tail)  always 
have  leisure,  and  they  rushed  out  to  give  information  to  the  commis- 
sioners. I  wish  to  say  that  under  oath,  because  that  is  my  opinion. 

Senator  MORGAN.  You  mentioned  the  Lambard  and  Brannan  suit, 
suggesting  that  perhaps  Mr.  Pattison  had  copied  it. 

Mr.  HUNTINGTON.  I  imagine  so  from  what  I  heard  of  his  doings  in 
California. 

Senator  MORGAN,  I  want  to  read  to  you  what  the  majority  of  the 
commission  say  about  that  : 

In  1870  suits  were  brought  or  threatened  by  Charles  A.  Lambard,  Samuel  Brannan, 
and  others,  against  Stanford,  Huntington,  Hopkins,  and  Crocker,  as  owners  of  the 


220          GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

stock  of  the  Central  Pacific  Railroad  Company,  alleging  that  those  persons  had 
been  guilty  of  many  violations  of  their  duties  as  directors,  and  that  they  had  voted 
profitable  contracts  to  themselves;  that  by  means  of  these  contracts  they  had  pro- 
cured possession  of  substantially  all  of  the  assets  of  the  company  remaining  after 
the  expenditure  of  the  actual  cost  of  construction.  The  commission  do  not  mean  to 
intimate  that  all  of  the  charges  contained  in  these  complaints  are  sustained  by  the 
evidence;  but  it  does  appear  that  the  four  persons  named  did  vote  contracts  to 
themselves.  Kinder  which  large  profits  were  made  and  divided.  The  allegations 
contained  in  these  complaints  were  such  as  would  compel  men  of  honor,  if  these 
allegations  were  false,  to  defend  themselves  at  any  cost.  It  appears  from  the  evi- 
dence that  all  these  suits  were  settled,  and  that  the  stock  owned  by  the  plaintiffs 
was  bought  at  rates  varying  from  $400  a  share  to  $1,000  a  share.  (See  evidence  of 
Stanford,  vol.  5,  p.  2641;  vol.  6,  pp.  2775,  2779.) 

You  may  make  any  statement  you  see  proper  about  that. 

Mr.  HUNTINGTON.  Their  information  was  picked  up  on  the  street 
corners,  I  have  no  doubt. 

Senator  MORGAN.  By  the  commission. 

Mr.  HUNTINGTON.  And  there  is  110  truth  in  that  report.  We  could 
not  get  men  to  join  us  in  the  contract.  There  never  was  a  man  who 
tried  harder  and  who  used  up  his  time  and  ability  to  a  greater  extent 
than  I  did  to  get  somebody  to  come  in  and  share  and  share  alike  with 
us  in  building  the  road.  But  not  a  man  of  any  importance  would  come 
in.  They  all  made  about  the  same  reply  j  they  would  not  take  the 
responsibility  of  undertaking  to  build  the  road.  When  the  Contract 
and  Finance  Company  completed  the  road  there  was  not  enough  by 
several  millions  to  have  paid  its  debts  created  by  the  building  of  the 
road,  notwithstanding  anybody's  report.  That  I  know.  I  am  speak- 
ing of  things  which  I  myself  know;  and  a  cleaner  piece  of  work  never 
was  done. 

Senator  MORGAN.  That  is  what  I  want  to  get  at — what  you  know. 

Mr.  HUNTINGTON.  I  do  know  that.  As  to  the  sale  of  stocks,  I  do 
not  know  anything  about  it  except  by  common  report  that  there  were 
some  shares  sold.  These  fellows  in  San  Francisco  charged  us  with 
every  crime  in  the  catalogue  except  one,  and  I  told  them  to  put  that  in, 
too;  that  is,  piracy  on  the  high  seas.  I  told  them  to  add  that. 

Senator  MORGAN.  They  did  not  do  it,  1  suppose,  because  there  is  no 
water  in  that  country. 

Mr.  HUNTINGTON.  Oh,  yes;  there  is  plenty  of  water.  I  say,  know- 
ing all  about  it,  that  we  could  not  pay  the  debts  created  by  the  building 
of  the  Central  Pacific,  by  many  millions,  out  of  any  proceeds  that  we 
could  get  from  the  assets. 

Senator  MORGAN.  How  did  you  pay  the  debts? 

Mr.  HUNTINGTON.  By  borrowing  the  money. 

Senator  MORGAN.  How  did  you  pay  the  borrowed  money? 

Mr.  HUNTINGTON.  The  stock  appreciated,  and  we  sold  it. 

Senator  MORGAN.  And  it  was  out  of  the  advance  of  value  which  you 
created  by  your  personal  efforts? 

Mr.  HUNTINGTON.  The  property  appreciated.  The  road  was  a  good 
road.  The  showing  was  sufficient  to  warrant  the  prices  obtained. 
But  after  the  Government  gave  great  subsidies  to  the  Northern  Pacific, 
and  to  the  Southern  Pacific,  and  to  the  Atlantic  and  Pacific,  so  that 
these  great  roads  divided  the  volume  of  business  and  cut  the  rates  in 
two,  the  value  of  the  shares  of  the  Central  Pacific  was  destroyed,  and 
the  prices  went  down. 

Senator  MORGAN.  That  will  be  the  subject  of  a  separate  inquiry. 

Mr.  HUNTINGTON.  It  is  a  part  of  the  whole  thing. 

Senator  MORGAN.  I  will  get  you  to  state  about  what  month  and  what 
year  the  Central  Pacific  and  the  Union  Pacific  made  through  connec- 
tion with  each  other? 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  221 

Mr.  HUNTINGTON.  It  was  on  the  10th  of  May,  1869. 

Senator  MORGAN.  You  then  went  into  regular  traffic  across  the  con- 
tinent with  your  line  of  road? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  have  a  sufficient  equipment  at  that  time 
to  do  all  the  business  ? 

Mr.  HUNTINGTON.  I  should  say  so.  Business  grew,  and  we  kept 
putting  on  additional  equipment.  When  the  road  was  completed  we 
had  equipment  enough  to  do  the  business  offered.  Of  course  we  were 
adding  to  it  all  the  time. 

Senator  MORGAN.  That  was  four  or  five  years  after  the  termination 
of  tne  civil  war? 

Mr.  HUNTINGTON.  Yes,  four  or  five  years. 

Senator  MORGAN.  So  that  the  existence  of  the  war  did  not  have  any 
particularly  stimulating  effect  on  the  income  of  the  road  I 

Mr.  HUNTINGTON.  No;  I  do  not  think  that  it  affected  the  income  of 
the  road  in  one  way  or  the  other.  The  main  work  in  building  the  road 
had  to  be  done  in  18G7.  The  Sierra  Nevndas  were  the  great  obstacle. 
The  Kocky  Mountains  were  ugly,  but  not  so  bad  as  the  Sierra  Nevadas. 

Senator  MORGAN.  What  is  the  fiscal  year  of  the  Central  Pacific 
Company  ? 

Mr.  HUNTINGTON.  I  believe  it  is  the  calendar  year. 

Senator  MORGAN.  So  that  we  will  commence  now  in  1870  when  the 
road  was  in  full  operation.  What  was  the  stock  of  the  Central  Pacific 
worth  in  1870? 

Mr.  HUNTINGTON.  I  do  not  know.  The  stock  could  have  been  sold 
for  10  cents,  I  know,  in  1869. 

Senator  MORGAN.  It  then  had  not  gone  into  operation  ? 

Mr.  HUNTINGTON.  Yes:  it  went  into  operation  on  the  10th  of  Mav, 
1869. 

Senator  MORGAN.  Between  1870  and  1880  was  there  not  a  rapid 
increase  in  the  value  of  the  stock? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  did  it  go? 

Mr.  HUNTINGTON.  I  think  between  70  and  80.  I  think  I  sold  some 
at  85. 

Senator  MORGAN.  Did  that  stock  ever  command  a  premium  in  the 
market? 

Mr.  HUNTINGTON.  Not  to  my  knowledge.  I  sold  it  a  good  deal  in 
blocks  to  brokers  in  New  York.  We  did  not  offer  a  share  in  the  New 
York  market  ourselves. 

Senator  MORGAN.  But  did  not  the  price  go  up  in  the  market? 

Mr.  HUNTINGTON.  Yes;  it  went  up  considerably;  I  do  not  know  how 
high. 

Senator  MORGAN.  Did  it  go  above  par? 

Mr.  HUNTINGTON.  I  do  not  recollect;  it  may  have.  I  sold  enough  to 
get  out  of  debt. 

Senator  MORGAN.  The  stock  of  the  Union  Pacific  went  away  above 
par,  did  it  not? 

Mr.  HUNTINGTON.  Yes;  a  good  deal  above  par. 

Senator  MORGAN.  It  went  higher  than  the  Central  Pacific? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  At  what  time  did  the  Central  Pacific  have  this 
high  rate  of  value? 

Mr.  HUNTINGTON.  I  Ao  not  know;  I  should  think  I  would  say  in  the 
eighties. 


222  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  In  1885,  probably? 

Mr.  HUNTINGTON.  Noj  I  should  say  from  memory  that  it  dropped  off 
before  1885. 

Senator  MORGAN.  As  soon  as  you  got  the  stock  high  enough  in  the 
market  you  let  it  go? 

Mr.  HUNTINGTON.  As  we  saw  our  way  to  pay  our  debts  we  did  it. 
We  always  did  that. 

Senator  MORGAN.  How  much  debt  did  the  Contract  and  Finance 
Company  have  at  the  time  of  the  completion  of  the  railroad  ? 

Mr.  HUNTINGTON.  I  think  I  have  answered  that  two  or  three  times — 
something  about  ten  millions. 

Senator  MORGAN.  I  thought  perhaps  that  by  asking  you  again  you 
would  be  able  to  state  just  how  much  it  was. 

Mr.  HUNTINGTON.  No ;  it  has  not  come  to  me  exactly. 

Senator  MORGAN.  I  hope  it  will  after  awhile. 

Mr.  HUNTINGTON.  I  will  be  much  pleased  if  it  does  to  give  you  the 
exact  figures. 

Senator  MORGAN.  You  had  $10,000,000  of  debts  to  pay  and  you  had 
how  Tnuch  stock  to  pay  these  debts  with  ? 

Mr.  HUNTINGTON.  I  think  we  had  over  $10,000,000  debts  to  pay,  and 
we  had  something  over  §50,000,000  stock  of  the  Central  Pacific  Railroad. 

Senator  MORGAN.  So  that  if  you  got  the  stock  up  to  an  average  of 
SO— 

Mr.  HUNTINGTON.  We  did  not  get  any  such  average  as  that. 

Senator  MORGAN.  Well,  up  to  an  average  of  50  cents  on  the  dol- 
lar  

Mr.  HUNTINGTON.  I  think  it  probably  averaged  50  cents  on  the  dollar. 

Senator  MORGAN.  So  that  you  had,  at  least,  $25,000,000  in  gold  with 
which  to  pay  this  $10,000,000  of  debt. 

Mr.  HUNTINGTON.  Up  in  the  eighties  gold  and  currency  had  got 
together  again,  I  think. 

Senator  MORGAN.  So  that,  by  continuing  your  debt  and  running 
your  credit,  you  got  the  advantage  by  time  in  the  depreciation  of  gold 
as  well  as  the  appreciation  of  Government  bonds  and  securities'?  You 
got  that  advantage? 

Mr.  HUNTINGTON.  Yes.  We  had  to  wait,  and  we  did  very  well  by 
waiting. 

Senator  MORGAN.  The  way  I  count  it,  I  find  that  $25,000,000  was 
made  by  the  operations  of  the  Contract  and  Finance  Company  in  the 
building  of  that  road. 

Mr.  HUNTINGTON.  I  do  not  understand  your  figures,  Senator. 

Senator  MORGAN.  My  figures  are  that  you  got  about  $80,000,000  of 
stock  and  sold  it  for  50  cents  on  the  dollar. 

Mr.  HUNTINGTON.  How  much  stock  do  you  say  we  got? 

Senator  MORGAN.  Eighty  million  dollars. 

Mr.  HUNTINGTON.  Only  $50,000,000. 

Senator  MORGAN.  Not  more  than  $50,000,000? 

Mr.  HUNTINGTON,  That  is  what  the  Contract  and  Finance  Company 
got. 

Senator  MORGAN.  Fifty  million  dollars  of  stock  which  you  sold  at  50 
cents  on  the  dollar  f 

Mr.  HUNTINGTON.  We  sold  some  of  it  as  low  as  18  cents  on  the 
dollar. 

Senator  MORGAN.  You  said  you  sold  it  at  an  average  of  50  cents, 
Put  the  amount  at  the  lowest  possible  figure,  $15,000,000 

Mr.  HUNTINGTON.  Put  it  at  $10,000,000. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  223 


{Senator  MORGAN.  I  don't  think  I  can  do  that. 
Mr.  HUNTINGTON.  According  to  my  recollection  we  had  something 
to  the  good  after  those  nearly  twenty  years  of  waiting.     We  got  some 
pay  for  the  waiting. 
Senator  MORGAN.  If  I  were  a  partner,  stating  an  account  with  you, 
I  would  not  compromise  on  that  account  for  $25,000,000.    How  much 
money  did  you  pay  out  of  your  own  pocket  in  this  business,  not  counting 
your  genius  or  your  labor  but  your  money  ? 

Mr.  HUNTINGTON.  I  can  not  say.  We  were  doing  a  very  large  hard- 
ware and  mercantile  business,  and  we  used  to  lend  money  pretty  largely. 
We  put  in  a  considerable  amount.  Mr.  Hopkins  was  attending  to  those 
things,  and  when  the  company  was  short  and  we  could  spare  them 
$100,000  or  $200,000,  and  sometimes  more  than  that,  we  did  so. 

Senator  MORGAN.  Did  you  pay  any  money  which  you  did  not  get 
back  in  money? 

Mr.  HUNTINGTON.    Oh,  yes;  certainly  we  did. 

Senator  MORGAN.  State  how  much. 

Mr.  HUNTINGTON.  I  do  not  know.    I  wish  Mr.  Hopkins  were  alive. 

Senator  MORGAN.  So  do  I.    It  would  save  a  great  deal  of  trouble. 

Mr.  HUNTINGTON.  He  kept  all  the  accounts. 

Senator  MORGAN.  I  suppose  so.  You  have  some  general  idea,  how- 
ever, of  your  own  business? 

Mr.  HUNTINGTON.  I  was  in  New  York  and  dreadfully  busy  all  the 
time,  working  days  and  nights,  and  Mr.  Hopkins  attended  to  matters 
in  California. 

Senator  MORGAN.  But  when  the  Contract  and  Finance  Company 
borrowed  from  your  business  house  $15,000  or  $20,000  or  $100,000  you 
kept  a  memorandum? 

Mr.  HUNTINGTON.  No  doubt. 

Senator  MORGAN.  And  it  was  on  your  mind? 

Mr.  HUNTINGTON.  Perhaps  so.  1  indorsed  paper  in  New  York  indi- 
vidually frequently. 

Senator  MORGAN.  Can  you  tell  the  committee  how  much  money  you 
put  into  this  railroad  programme  out  of  your  own  pocket  and  which  you 
never  got  back  from  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  No,  I  can  not;  but  we  did  put  in  enough  money 
to  make  a  great  success  of  the  building  of  the  road,  so  far  as  the  road 
was  concerned. 

Senator  MORGAN.  Speaking  of  yourself  personally,  how  much  did 
you  put  in,  and  how  much  did  the  company  fail  to  pay  you  back  ? 

Mr.  HUNTINGTON.  I  can  not  say. 

Senator  MORGAN.  Can  you  state  now  that  you  did  put  money  in 
there  which  you  did  not  get  out  when  the  road  was  finished  ? 

Mr.  HUNTINGTON.  Oh,  yes. 

Senator  MORGAN.  How  much? 

Mr.  HUNTINGTON.  I  can  not  say,  but  I  know  that  we  put  in  consid- 
erable money. 

Senator  MORGAN.  Get  as  near  as  you  can  to  the  amount. 

Mr.  HUNTINGTON.  I  have  no  personal  means  of  knowing. 

Senator  MORGAN.  It  is  twenty  years  ago  and  tire  books  have  been 
burned  up? 

Mr.  HUNTINGTON.  It  is  more  than  thirty  years  ago. 

Senator  MORGAN.  Of  course  you  can  not  be  exact,  but  I  would  like 
you  to  be  as  exact  as  you  can  be. 

Mr.  HUNTINGTON.  I  would  take  great  pains  to  satisfy  the  committee 
on  that  point,  and  if  it  in.ade  any  4iffereuce  to  anv  huinan 


224  GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS. 

would  sit  up  day  and  night  to  try  to  find  it  out,  but  I  do  not  think  it 
does. 

Senator  MORGAN.  I  think  it  is  a  very  legitimate  inquiry,  to  ascertain 
how  much  money  you  made  out  of  this  business. 

Mr.  HUNTINGTON.  Well,  I  have  been  at  work  sixty  years,  and  I  have 
always  made  something  each  year. 

Senator  MORGAN.  I  have  no  doubt  of  that. 

Mr.  HUNTINGTON.  And  I  have  always  been  using  my  money  and 
using  my  credit. 

Senator  MORGAN.  In  the  operations  of  this  railroad  which,  the  com- 
mission says,  was  owned  by  you  four  gentlemen? 

Mr.  HUNTINGTON.  I  do  not  think  that  anybody  else  should  have 
half  the  credit  that  we  have. 

Adjourned  until  to-morrow,  Friday,  February  21,  at  10.30  a.  in. 


WASHINGTON,  D.  C.,  Friday,  February  21, 1896. 
The  committee  met  pursuant  to  adjournment.    Present,  Senators 
Gear  (chairman)  and  Morgan. 

THE  CENTRAL  PACIFIC. 
EXAMINATION  OF  MR.  C.  P.  HUNTINGTON— Continued. 

Senator  MORGAN.  When  concluding  the  examination  yesterday  I  was 
asking  you  some  questions  based  on  the  report  of  the  United  States 
Pacific  Raihoad  Commission,  which  was  sent  out  to  investigate  these 
two  railroad  companies,  and  my  questions  were  predicated  on  the 
majority  report  of  E.  Ellery  Anderson  (the  gentleman  who  testified  here 
the  other  day)  and  David  T.  Littler,  and  not  on  the  minority  report  of 
Mr.  Pattison.  On  page  73  of  their  report,  speaking  of  an  examination 
made  by  the  Wilson  committee  into  the  condition  of  these  railroad  com- 
panies or  in  relation  to  one  of  them — the  Central  Pacific,  I  suppose  (I 
have  not  that  report  before  me) — they  speak  of  suits  brought  or  threat- 
ened by  Lombard  &  Brannan  and  others  against  Stanford,  Huntington, 
Hopkins,  and  Crocker,  alleging  that  these  persons  had  been  guilty  of 
many  violations  of  their  charge  as  directors  of  the  Central  Pacific  Com- 
pany, and  had  voted  profitable  contracts  to  themselves;  that  by  means 
of  these  contracts  they  had  procured  possession  of  substantially  all  of 
the  assets  of  the  company  remaining  after  the  expenditures  of  the  actual 
cost  of  construction. 

The  commissioners  proceed  to  say  that  the  evidence  on  which  the 
successful  prosecution  of  such  suits  would  necessarily  depend  was  con- 
tained in  the  books  of  Crocker  &  Co.,  and  of  the  Contract  and  Finance 
Company,  because  the  actual  cost  of  construction  to  that  company, 
compared  to  the  actual  payments  made  by  the  Central  Pacific  E-ailroad 
Company,  would  disclose  profits  divided  between  Stanford,  Huntington, 
Hopkins,  and  Crocker.  The  commissioners  say,  "  They,  and  they  alone, 
were  interested  in  the  suppression  of  this  evidence."  Is  it  true  that 
the  actual  cost  of  construction  to  that  company,  compared  to  the  actual 
payments  made  by  the  Central  Pacific  Railroad  Company,  would  dis- 
close the  profits  divided  between  Stanford,  Huntington,  Hopkins,  and 
Crocker? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.          225 


I  Mr.  HUNTINGTON.  I  suppose  it  would.  I  caii  not  answer  that  ques- 
tion as  to  whether  it  would  or  not,  because  I  do  not  have  anything 
3efore  me  to  judge  from  or  to  know  whether  it  would  or  not.  There 
>vas  no  doubt  but  that  we  were  the  great  factors  in  the  building  of  the 
x>ad;  but  that  we  got  any  profits  out  of  it — anything  like  what  was 
sufficient  to  pay  for  the  labor  we  performed  and  the  risk  that  we  ran 
n  those  twenty  years'  work — I  can  say  most  positively  that  we  did  not 
get  sufficient  to  pay  us  for  doing  the  work.  We  did  the  work  very 
largely,  and  were  responsible  for  it,  and  we  used  the  money  which  we 
were  compelled  to  use,  but  not  to  the  injury  of  anyone. 

Senator  MORGAN.  The  committee  could  very  much  better  come  to  a 
correct  conclusion  about  that  matter  if  it  had  a  statement  of  what  the 
profits  were. 

Mr.  HUNTINGTON.  As  I  showed  the  committee  the  other  day,  what 
we  made  was  the  $44,000,000  of  gold  which  we  received  from  the  pro- 
ceeds of  all  the  bonds  and  the  stock,  putting  the  stock  at  twice  its 
value  when  the  road  was  completed,  and  when  the  stock  could  not  be 
sold  at  5  cents  on  the  dollar;  but,  after  waiting  twenty  years,  we  did 
recoup  our  money.  That  commission  got  its  facts,  1  suppose,  from  the 
Sam  Brannan  complaint — a  complaint  got  up  by  some  briefless  lawyers. 
I  am  told,  and  L  believe,  that  they  got  up  a  complaint  under  an  agree- 
ment by  which  they  were  to  share  whatever  plunder  they  got,  call  it 
what  you  like.  I  believe  that,  because  I  have  been  told  so.  I  believe 
that  Mr.  Stanford  did  make  some  settlements,  but  T  believe  that  they 
were  made  from  a  political  standpoint.  I  never  have  been  in  politics 
myself.  The  same  case  exactly  they  brought  against  me  in  New  York, 
as  I  understand.  They  said  that  there  was  something  wrong,  some- 
thing fraudulent.  I  said  to  them,  "All  right,  take  your  suit  into 
court,"  and  I  refused  to  settle.  It  was  in  the  courts  more  than  twenty 
years,  and  the  decisions  were  as  clean  in  my  favor  by  the  court  of 
appeals  in  New  York  as  any  decisions  that  were  ever  made.  I  did  not 
give  them  anything.  I  knew  that  I  was  right.  They  wanted  me  to 
compromise,  but  I  refused  to  do  so.  Mr.  Beaton  came  to  me  to  make  a 
compromise,  but  I  refused  to  make  any  compromise.  It  took,  them 
twenty  years,  and  then  they  didn't  prove  their  charge,  and  no  part  of  it. 

Senator  MORGAN.  Have  you  not  an  estimate,  even  a  rough  one,  as  to 
the  actual  amount  of  money  you  made  in  your  business  connection  with 
the  Contract  and  Finance  Company  in  the  building  of  the  Central 
Pacific? 

Mr.  HUNTINGDON.  As  I  answered  that  question  yesterday,  I  have  not 
any  definite  sum  in  my  mind.  Mr.  Hopkins  attended  to  those  things. 
I  made  something;  1  am  quite  satisfied  it  could  not  have  amounted  to 
more  than  $3,000,000  or  $4,000,000. 

Senator  MORGAN.  Which  you  made  personally? 

Mr.  HUNTINGTON.  Yes,  for  twenty  years'  work. 

Senator  MORGAN.  That  is  pretty  good  pay  for  twenty  years'  work. 

Mr.  HUNTINGTON.  No;  not  for  the  work  that  I  did. 

Senator  MORGAN.  I  have  been  doing  as  much  work  for  twenty  years, 
and  I  never  got  one-twentieth  part  of  that  amount. 

Mr.  HUNTINGTON.  When  people  sit  up  nights  handling  things  that 
go  into  the  hundreds  of  millions,  and  take  the  responsibility,  they  are 
entitled  to  be  well  paid.  I  would  not  do  that  kind  of  work  for  any 
such  price  as  that,  not  on  my  own  volition. 

Senator  MORGAN.  All  the  capital  that  you  did  this  work  with,  and 
on  which  you  made  this  meager  sum,  was  furnished  you  by  the  United 
States  Government? 
p  R 15 


226          GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.^ 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  What  part  of  it  was  not  furnished  by  the  Govern- 
ment  of  the  United  States  ?  How  much  did  you  put  in  personally  t 

Mr.  HUNTINGTON.  I  put  in  all  that  I  had  made  in  our  other  business, 

Senator  MORGAN.  How  much? 

Mr.  HUNTINGTON.  I  can  not  say ;  but  we  put  in  sufficient  to  make  a 
great  success  of  the  work. 

Senator  MORGAN.  That  is  no  answer  to  the  question,  and  will  not 
be  accepted  as  an  answer.  How  much  money  did  you  put  in? 

Mr.  HUNTINGTON.  I  can  not  say  exactly.    I  wish  I  knew. 

Senator  MORGAN.  You  can  come  within  a  few  hundred  thousand 
dollars,  I  suppose? 

Mr.  HUNTINGTON.  I  do  not  know  how  much  we  put  in,  but  I  certainly 
put  in  more  than  $1,000,000,  and  that  was  sufficient  as  a  basis  for  the 
work.  Whatever  I  did  put  in  was  sufficient  to  make  a  success  of  the 
work. 

Senator  MORGAN.  Do  you  mean  that  you  put  it  in  to  remain  perma- 
nently, or  only  as  the  requirements  of  the  work  demanded  ? 

Mr.  HUNTINGTON.  I  put  in  what  we  had  to  put  in  from  time  to  time. 
There  was  not  a  time  that  I  would  not  have  mortgaged  my  dwelling 
house  in  order  to  get  money  to  make  a  success  of  the  work. 

Senator  MORGAN.  Was  the  money  that  you  put  in  taken  out  of  your 
private  fortune1? 

Mr.  HUNTINGTON.  Yes;  I  never  was  a  rich  man,  and  I  am  not  to-day. 
I  have  got  property,  but  I  have  been  a  borrower  for  the  last  fifty-eight 
years. 

Senator  MORGAN.  The  money  that  you  speak  of  putting  into  this 
Contract  and  Finance  Company  was  money  that  you  borrowed,  I 
suppose? 

Mr.  HUNTINGTON.  Some  of  it  was  and  some  was  not.  , 

Senator  MORGAN.  But  it  must  have  come  out  of  your  private  fortune. 

Mr.  HUNTINGTON.  It  was  private  money. 

Senator  MORGAN.  How  much  money  did  you  take  out  of  your  own 
pocket,  or  out  of  your  own  bank  account,  and  put  into  that  construction 
company? 

Mr.  HUNTINGTON.  I  can  not  tell.  It  was  taken  out  again  and  again, 
and  was  loaned  and  paid  back. 

Senator  MORGAN.  Was  it  not  a  fact  that  you  merely  put  in  your 
credit  from  time  to  time,  and  that  the  company,  as  fast  as  it  received 
the  money,  met  the  liabilities  which  you  had  on  your  notes  discounted 
iii  bank  ? 

Mr.  HUNTINGTON.  No;  as  I  said,  I  often  put  in  money  when  money 
was  particularly  needed,  and  I  often  borrowed  money  in  order  to  put 
it  in. 

Senator  MORGAN.  Who  were  the  other  officers  of  the  company? 

Mr.  HUNTINGTON.  Mark  Hopkins  was  treasurer,  and  E.  H.  Miller, 
jr.,  was  secretary. 

Senator  MORGAN.  Did  you  ever  obtain  from  them,  in  the  form  of  a 
voucher  or  receipt,  any  evidence  that  you  had  put  actual  money  into 
that  concern  ? 

Mr.  HUNTINGTON.  Yes ;  I  was  a  subscriber  for  stock,  and  paid  in  a 
few  thousand  dollars  on  the  stock. 

Senator  MORGAN.  How  much  did  you  pay  on  the  stock? 

Mr.  HUNTINGTON.  I  do  not  know.  It  was  not  very  much ;  I  should 
think  not  more  than  about  $8,000  or  $10,000.  That  was  when  they 
started  to  organize  the  company. 


GOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS.          227 

Senator  MORGAN.  Did  you  ever  pay  anything  else  in  cash  for  that 
stock  f 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  much  1 

Mr.  HUNTINGTON.  Whatever  the  requirement  was.  It  was  all  paid  for. 

Senator  MORGAN.  An  indifferent  statement  of  that  sort  is  no  answer 
to  my  question. 

Mr.  HUNTINGTON.  I  am  answering  your  question  the  best  I  can. 

Senator  MORGAN.  I  am  afraid  not. 

Mr.  HUNTINGTON.  I  am,  and  when  I  say  I  am,  that  is  what  that 
means. 

Senator  MORGAN.  You  can  state  whether,  in  addition  to  the  $8,000 
or  $10,000,  you  paid  any  money  on  that  stock. 

Mr.  HUNTINGTON.  Mr.  Hopkins  attended  to  these  affairs,  and  I  have 
no  doubt  he  paid  in  whatever  was  necessary  to  be  paid  in  under  the 
statute. 

Senator  MORGAN.  Can  you  state  on  oath  that  you,  or  Mr.  Hopkins 
on  your  account,  paid  any  money  into  that  concern  except  the  money 
necessary  to  organize  it  in  the  first  instance1? 

Mr.  HUNTINGTON.  Yes;  a  great  deal  of  money. 

Senator  MORGAN.  How  much? 

Mr.  HUNTINGTON.  I  don't  know;  I  may  have  put  in  several  hundred 
thousand  dollars. 

Senator  MORGAN.  In  money? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Was  that  in  the  form  of  money  lodged  with  the 
treasurer  of  the  company  for  which  you  took  a  voucher  or  receipt? 

Mr.  HUNTINGTON.  I  have  no  doubt  of  it;  but  I  did  not  see  it. 

Senator  MORGAN.  What  has  become  of  these  vouchers  or  receipts? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Were  they  burned  or  destroyed  with  the  books 
and  papers  of  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  I  do  not  know.  They  may  have  been  sold  as 
paper  stock,  or  they  may  have  been  burned  up;  because,  when  the 
whole  thing  was  closed  up  and  the  company  was  disincorporated,  it 
was  hardly  worth  while  to  cumber  up  an  office  with  heaps  of  books 
and  papers  of  that  class  of  literature. 

Senator  MORGAN.  I  never  heard  it  called  literature  before.  You 
say  that  you  paid  into  that  company — "we,"  you  say.  Whom  do  you 
mean  by  "we?" 

Mr.  HUNTINGTON.  I  meant  Mr.  Hopkins  and  myself.  He  was  doing 
all  the  business  at  that  end.  He  was  there,  and  I  was  in  New  York 
and  Boston. 

Senator  MORGAN.  You  say  "  we"  put  into  that  company  several  hun- 
dred thousand  dollars? 

Mr.  HUNTINGTON.  I  referred  to  myself— to  me,  personally. 

Senator  MORGAN.  You  meant  that  you  had  put  in  several  hundred 
thousand  dollars? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  pay  it  on  stock? 

Mr.  HUNTINGTON.  I  should  say  so;  I  don't  know  what  else  I  could 
have  paid  it  on. 

Senator  MORGAN.  Did  you  take  certificates  of  stock  when  you  made 
your  payments? 

Mr.  HUNTINGTON.  I  think  that  that  was  the  way  that  Mr.  Hopkina 
would  have  done  it. 


228  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  How  many  certificates  of  stock  did  you  get? 

Mr.  HUNTINGTON.  As  I  said  several  times,  I  do  not  remember, 
because  I  do  not  think  I  ever  counted  the  shares  myself.  I  had 
absolute  confidence  in  Mr.  Hopkins. 

I   Senator  MORGAN.  Did  you  sell  these  certificates  of  stock? 
;   Mr.  HUNTINGTON.  Yes. 
:   Senator  MORGAN.  To  whom? 

Mr.  HUNTINGTON.  I  do  not  know.  They  were  sold  at  various  times, 
mostly  in  bulk. 

Senator  MORGAN.  I  am  speaking  of  the  stock  of  the  Contract  and 
Finance  Company. 

Mr.  HUNTINGTON.  And  I  was  thinking  of  the  shares  of  the  Central 
Pacific.  I  do  not  think  I  ever  saw  the  shares  of  the  Contract  and 
Finance  Company. 

Senator  MORGAN.  I  do  not  think  you  ever  did  either.  You  did  not 
state  it  before  if  you  did.  You  paid  several  hundred  thousand  dollars 
on  the  stock  of  the  Contract  and  Finance  Company — you  bought  stock 
with  the  several  hundred  thousand  dollars  that  you  paid  in  ? 

Mr.  HUNTINGTON.  My  mind  was  on  the  Central  Pacific.  I  never  was 
in  the  office  of  the  Contract  and  Finance  Company  in  my  life,  and  I 
do  not  think  I  ever  saw  the  books  unless  I  saw  them  in  masses  in  the 
room. 

Senator  MORGAN.  Are  you  in  the  habit  of  turning  over  your  busi- 
ness property — books  and  bank  accounts — to  somebody  else? 

Mr.  HUNTINGTON.  If  I  did  not  trust  anybody  with  my  business  I 
could  not  have  been  here.  I  trust  a  man  all  in  all.  I  would  have 
trusted  Mr.  Hopkins  before  myself;  not  in  integrity ;  but  when  it  came 
to  the  handling  of  papers  if  Mark  Hopkins  said  it  was  right,  I 
assented. 

Senator  MORGAN.  Did  Mr.  Hopkins  have  control  of  your  bank 
account  and  your  financial  resources  at  his  will  and  pleasure? 

Mr.  HUNTINGTON.  I  think  that  if  Mark  Hopkins  had  told  me  that 
he  had  sold  my  dwelling  house,  and  if  he  had  sent  me  the  deed  of  sale 
I  would  have  signed  it  without  reading  it,  I  had  so  much  confidence  in 
him. 

Senator  MORGAN.  I  suppose  Mr.  Hopkins  at  least  informed  you  what 
he  had  done  with  your  money? 

Mr.  HUNTINGTON.  When  I  went  out  to  California,  once  a  year,  he 
said  things  are  so  and  so,  and  he  handed  me  a  piece  of  paper.  I  looked 
at  it  and  said,  "All  right."  I  have  always  found  that  it  is  a  better  way 
to  trust  somebody  than  to  distrust  everybody. 

Senator  MORGAN.  Did  he  inform  you  from  time  to  time  of  the  sums 
of  money  that  he  took  out  of  your  private  treasury  and  put  into  stock 
of  the  Contract  and  Finance  Company  ? 

Mr.  HUNTINGTON.  Not  as  a  rule.  He  said :  "  We  did  so  and  so,  and 
we  want  more  money  on  the  work.'7  My  desire  was  that  we  should  not 
fail  before  we  got  beyond  the  top  of  the  Sierra  Nevadas.  There  was 
not  a  time  when,  if  anyone  whom  I  had  confidence  in  had  offered  to 
give  me  half  of  what  the  work  had  cost  and  to  finish  it,  I  would  not 
have  said:  " Take  it." 

Senator  MORGAN.  I  do  not  want  to  get  into  that  romantic  history  in 
the  mountains. 

Mr.  HUNTINGTON.  You  should  know  all  that  I  know.  I  think  you 
would  not  ask  so  many  questions  if  you  knew  all  that  I  know. 

Senator  MORGAN.  I  understood  you  to  say  that  you  never  owned  any 
stock  in  the  Contract  and  Finance  Company. 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS. 

Mr.  HUNTINGTON.  No;  I  said  I  supposed  I  did.  I  said  I  did  not 
know  how  much. 

Senator  MORGAN.  You  never  sold  any  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Has  Mr.  Hopkins  sold  any  for  you? 

Mr.  HUNTINGTON.  No;  I  think  not.  When  Mr.  Hopkins  wrote  to 
me  at  Boston  about  organizing  a  company 

Senator  MORGAN.  That  is  getting  away  back  again.  There  is  no 
occasion  for  going  back  there  again. 

Mr.  HUNTINGTON.  Well,  these  questions  have  been  asked  five  or  six 
times. 

Senator  MORGAN.  You  then  said  that  you  did  own  r.tock  in  the 
Contract  and  Finance  Company. 

Mr.  HUNTINGTON.  I  said  that  I  had  no  doubt  but  that  I  owned  some 
stock  in  the  Contract  and  Finance  Company. 

Senator  MORGAN.  But  you  will  not  say  that  you  did. 

Mr.  HUNTINGTON.  I  say  I  have  no  doubt  that  I  did. 
*  Senator  MORGAN.  Do  you  know  that  you  did? 

Mr.  HUNTINGTON.  I  never  saw  the  books. 

Senator  MORGAN.  And  you  never  saw  the  certificates1? 

Mr.  HUNTINGTON.  No;  but  Mark  Hopkins  told  me,  I  am  sure,  tha,t 
we  had  stock  in  the  company.  I  do  not  think  I  ever  saw  a  certificate 
of  that  stock. 

Senator  MORGAN.  But  you  are  firm  in  the  belief  that  you  did  own 
some? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  But  you  do  not  know  as  to  the  amount? 

Mr.  HUNTINGTON.  I  do  not  know.  Very  likely  it  was  considerable. 
When  Mr.  Hopkins  asked  me  how  much  stock  we  would  take  I  tele- 
graphed him:  "Take  as  little  as  you  can  and  as  much  as  you  must." 

Senator  MORGAN.  How  much  did  he  tell  you  he  "must"  take? 

Mr.  HUNTINGTON.  He  did  not  reply  to  that  telegram.  It  was  not 
necessary.  He  had  my  full  authority. 

Senator  MORGAN.  And  Mr.  Hopkins  never  informed  you  how  much 
stock  he  had  taken  in  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  I  would  not  say  that  he  did  not.  Very  likely 
he  did. 

Senator  MORGAN.  What  information  did  he  give  you  as  to  the 
amount  of  stock  he  took? 

Mr.  HUNTINGTON.  I  do  not  know  the  amount,  and  I  am  not  certain  that 
he  told  me. 

Senator  MORGAN.  About  how  much  stock  do  you  think  he  took  in  that 
company  ? 

Mr.  HUNTINGTON.  I  am  sure  I  can  not  say. 

Senator  MORGAN.  About  how  much  ? 

Mr.  HUNTINGTON.  If  I  could  tell  you  the  one  I  could  tell  you  the  other. 

Senator  MORGAN.  You  can  inform  the  committee  of  the  impression  on 
your  mind  as  to  the  amount  of  stock  that  you  owned  in  that  company 
through  the  assistance  of  Mr.  Hopkins. 

Mr.  HUNTINGTON.  I  have  not  the  amount  on  my  mind.  I  have  this 
on  my  mind,  that  I  was  carrying  a  load  which  I  hated  awfully  to  carry, 

Senator  MORGAN.  When  that  company  had  finished  its  work  in  build- 
ing the  Central  Pacific  how  much  stock  did  you  own  in  it? 

Mr.  HUNTINGTON.  In  what  company? 

Senator  MORGAN.  In  the  Contract  and  Finance  Company. 

Mr.  HUNTINGTON.  I  do  not  know. 


230  GOVERNMENT   DEBT   OP   THE   PACIFIC   RAILROADS. 

i  Senator  MORGAN.  About  how  much? 
i  Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Can  you  state  within  a  million  of  how  much? 

Mr.  HUNTINGTON.  I  would  not  say. 

Senator  MORGAN.  Within  five  millions  of  how  much? 

Mr.  HUNTINGTON.  Well,  I  do  not  know. 

Senator  MORGAN.  State  within  $10,000,000  how  much  stock  did  you 
own  in  it. 
,     Mr.  HUNTINGTON.  I  owned  more  or  less  than  that. 

Senator  MORGAN.  But  you  do  not  know  how  much  it  was? 

Mr.  HUNTINGTON.  Noj  but  I  am  satisfied  that  it  was  not  more  than 
that.  Very  likely — I  can  say,  to  the  best  of  my  knowledge  and  belief, 
that  it  was  more  than  $1,000,000. 

Senator  MORGAN.  Assuming  that  it  was  $10,000,000  of  stock  that 
you  owned  at  the  time  the  company  went  up,  state  whether  you  paid 
ten  millions  in  money  for  it? 

Mr.  HUNTINGTON.  I  should  say  so.  I  should  say  we  had  paid  even 
more  than  that.  We  borrowed  it  largely.  We  borrowed  on  our  own 
credit  and  we  made  a  great  success  in  building  the  road. 

Senator  MORGAN.  At  the  time  that  the  Contract  and  Finance  Com- 
pany was  ready  to  wind  up  its  affairs — at  the  time  it  finished  the 
building  of  the  railroad— did  that  company  owe  you  for  any  borrowed 
money  ? 

Mr.  HUNTINGTON.  I  should  think  I  was  on  their  paper,  at  least,  and 
they  may  have  owed  me.  The  object  was  to  complete  the  work. 

Senator  MORGAN.  I  do  not  want  the  object  of  the  company;  that  is 
no  answer  to  my  question.  I  am  not  going  to  have  that  any  more  if  I 
can  control  it. 

Mr.  HUNTINGTON.  It  depends  upon  the  questions  you  ask  what  the 
answers  will  be. 

Senator  MORGAN.  I  want  to  know  if  they  owed  you  for  any  borrowed 
money  at  the  time  they  wound  up  their  affairs? 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  owed  a  great 
deal  of  money,  just  how  much  I  am  unable  to  state.  Whether  I  had 
borrowed  the  money  myself  or  whether  they  had  borrowed  it  and  I  was 
on  their  paper  I  can  not  say.  It  is  thirty  years  ago,  very  nearly,  and 
things  were  all  finished  and  I  had  dropped  the  matter  out  of  my  mind. 

Senator  MORGAN.  If  they  owed  you  any  money  was  it  money 
obtained  on  your  credit  or  money  taken  out  of  your  pocket? 

Mr.  HUNTINGTON.  I  would  say,  to  the  best  of  my  recollection,  that 
it  was  some  of  both. 

Senator  MORGAN.  How  much  of  each? 

Mr.  HUNTINGTON.  I  can  not  tell  the  amounts.  It  is  almost  impossi- 
ble for  a  man  doing  so  much  business  as  I  have  been  from  year  to  year 
to  recollect  things  that  happened  thirty  years  ago  and  which  have  been 
entirely  settled  up.  No  man  could  do  it,  I  think. 

Senator  MORGAN.  Perhaps  we  had  better  go  back  to  your  deposition 
given  on  a  former  occasion,  and  to  the  report  of  the  United  States 
Pacific  Railroad  commission  about  it,  so  as  to  refresh  your  memory. 
The  commission  says,  on  page  73  of  its  report : 

In  1873  the  disclosures  made  by  the  examinations  conducted  by  the  Wilson  com- 
mittee excited  much  public  attention  and  indignation,  with  reference  to  similar 
practices  affecting  the  Union  Pacific  Railroad  Company,  through  the  intervention  of 
the  Credit  Mobilier.  Comparatively  little  attention  was  given  by  that  committee  to 
the  affairs  of  the  Central  Pacific  Railroad  Company. 

Mr.  Huntington,  however,  was  examined  as  a  witness.  He  was  examined  as  to 
the  profits  resulting  from  the  construction  of  the  Central  Pacific  road.  He  described 


GOVERNMENT   DEBT    OF   THE    PACIFIC   RAILROADS.  231 

them  as  being  confined  to  the  stock  of  the  company,  and  that  the  share  received  by, 
him  amounted  to  $1,000,000  of  this  stock.  (See  report  of  the  Wilson  committee,  tes- 
timony of  Huntington,  p.  703.)  This  evidence  was  given  more  than  two  years  after 
the  completion  of  the  Central  Pacific  Railroad,  and  Mr.  Stanford  has  testified  that 
each  of  the  parties  in  interest  received  $13,000,000  of  the  stock  of  the  company  as 
his  share  of  the  profits.  (See  evidence  of  Stanford,  vol.  5,  pp.  2655,  2656.)  Mr. 
Huntiiigton  must,  therefore,  have  known  when  he  was.  testify  ing  before  the  Wilson 
committee  that  his  statement  was  not  a  true  one. 

Mr.  HUNTINGTON.  If  I  stated  it  at  the  time  it  was  correct. 

Senator  MORGAN.  I  give  you  now,  after  having  recited  this  matter, 
a  full  opportunity  to  give  any  explanation  that  you  may  desire  of  this 
accusation  against  you. 

Mr.  HUNTINGTON.  I  do  not  fight  words  thrown  into  the  air  by  irre- 
sponsible committees,  as  those  committees  usually  were.  They  picked 
up  their  information  on  the  corners  of  the  streets  in  San  Francisco  from 
discharged  employees  and  blackmailers.  They  got,  very  likely,  the 
best  they  could ;  but  we  did  not  go  out  to  gather  things  thrown  into 
the  air.- 

Senator  MORGAN.  It  appears  that  the  commissioners  based  their 
statement  upon  your  deposition  and  Mr.  Stanford's,  and  that  Stanford 
said  that  each  of  the  parties  in  interest  received  $13,000,000  as  his 
share  of  the  profits. 

Mr.  HUNTINGTON.  The  stock  of  the  Contract  and  Finance  Company 
was  only  $5,000,000. 

Senator  MORGAN.  This  refers  to  the  stock  of  the  Central  Pacific 
Railroad  Company. 

Mr.  HUNTINGTON.  That  I  do  not  know.  Stanford  probably  knew  it 
if  he  swore  to  it.  He  probably  knew  whether  he  got  it. 

Senator  MORGAN.  Did  he  know  what  you  got? 

Mr.  HUNTINGTON.  I  do  not  think  he  did;  Hopkins  would  have 
known. 

Senator  MORGAN.  If  there  was  an  equal  division  at  the  time  of  the 
settlement,  how  could  Stanford  fail  to  know  whether  he  got  more  or 
less  than  the  balance  of  you1? 

Mr  HUNTINGTON.  I  do  not  know.  Mr.  Stanford  knew  very  little 
about  the  business  of  the  company;  but  I  do  not  know  how  he  could 
have  made  that  mistake.  He  knew  very  little  of  the  Central  Pacific 
road. 

Senator  MORGAN.  You  say  that  his  statement  was  a  mistake? 

Mr.  HUNTINGTON.  I  do  not  say  that  it  was  a  mistake.  I  do  not 
know  how  he  arrived  at  it. 

Senator  MORGAN.  How  much  did  you  receive? 

Mr.  HUNTINGTON.  I  do  not  recollect. 

Senator  MORGAN.  Then  why  do  you  not  believe  that  Stanford  was 
correct? 

Mr.  HUNTINGTON.  I  have  no  idea  that  there  was  such  an  amount  of 
stock  delivered  at  any  time.  I  do  not  know  just  where  the  Contract 
and  Finance  Company  commenced.  The  first  seven  contractors  built 
from  Sacramento  to  New  Castle,  31  miles.  Then  Charles  Crocker  & 
Co.  took  a  contract  to  build  over  the  mountains,  something  over  100 
miles — 120  miles  across  the  Sierra  Nevada.  They  took  a  contract  for 
that,  and  I  do  not  think  they  finished  that  contract.  I  think  they  got 
some  thirteen  millions  of  stock  for  that.  How  much  of  that  went  to  the 
Contract  and  Finance  Company,  when  they  took  up  the  contract  where 
it  stopped,  I  do  not  know.  If  that  were  so,  that  would  not  leave  more 
than  forty-five  millions  of  stock  at  the  most.  I  think  it  was  thirteen 
or  fourteen  millions  that  Crocker  received.  The  other  parties  I  am 


232          GOVERNMENT    DEBT   OF   THE   PACIFIC   RAILROADS. 

quite  sure  got  some  stock  for  the  building  of  the  first  30  miles.  So, 
how  Stanford  could  have  got  $13,000,000,  I  can  not  say. 

Senator  MORGAN.  I  understand  you  to  deny  that  you  got  thirteen 
millions  of  stock  of  the  Central  Pacific  Railroad  Company  as  testified 
to  by  Stanford? 

Mr.  HUNTINGTON.  I  say  I  do  not  believe  that  we  did,  and  I  do  not 
believe  that  there  was  any  such  amount  of  stock  to  divide  after  the 
contract  with  Charles  Crocker  &  Co.  and  the  other  seven  contractors. 
There  was  only  sixty  millions  of  stock  altogether. 

Senator  MORGAN.  On  page  74  of  the  report  the  commissioners  state: 

The  books  in  question  are  identified  by  John  Miller,  William  E.  Brown,  Daniel 
Yost,  and  others,  as  large  journals  and  ledgers  containing  several  hundred  pages 
each,  numbering  in  all  from  12  to  15  volumes,  and  their  disappearance  by  accident 
or  inadvertence  is  simply  impossible. 

Mr.  HUNTINGTON.  They  were  probably  burned  up  or  sold  for  paper 
stock  if  they  vrore  destroyed  at  all.  I  have  no  doubt  they  were 
destroyed;  for  I  have  asked  for  them  myself  within  the  last  five  years, 
and  somebody  told  me  they  were  destroyed. 

Senator  MORGAN  (reading).  "  Mr.  Yost  testified  that  the  last  he  saw 
of  them  Hopkins  was  personally  engaged  in  packing  them  in  boxes." 
Did  you  know  Mr.  Yost? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  sort  of  a  man  was  he? 

Mr.  HUNTINGTON.  He  is  dead. 

Senator  MORGAN.  What  sort  of  a  man  was  he  when  living? 

Mr.  HUNTINGTON.  Well,  the  best  thing  he  did  was  to  die. 

Senator  MORGAN.  And  may  be  the  next  best  thing  that  he  did  was 
to  help  get  away  with  those  books. 

Mr.  HUNTINGTON.  No;  I  do  not  think  so.  He  was  a  light-weight 
man.  He  would  not  know  to-day  what  he  would  do  to-morrow. 

Senator  MORGAN.  I  suppose  he  knew  to-day  what  he  had  done  yes- 
terday? 

Mr.  HUNTINGTON.  Yes;  but  he  might  not  tell  it. 

Senator  MORGAN.  You  have  a  poor  opinion  of  him  ? 

Mr.  HUNTINGTON.  I  have.    I  have  what  is  in  my  mind  very  strong. 

Senator  MORGAN.  These  commissioners  go  on  to  say:  "These  books 
had  been  kept  for  several  years  by  William  E.  Brown."  Did  you  know 
him? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  sort  of  a  man  is  he? 

Mr.  HUNTINGTON.  He  is  not  with  us  now;  he  is  a  very  clever  man. 

Senator  MORGAN.  How  long  did  you  keep  him  in  your  employment? 

Mr.  HUNTINGTON.  W"e  did  not  keep  him  at  all. 

Senator  MORGAN.  But  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  I  do  not  know  that  he  was  in  their  employ  at  all. 

Senator  MORGAN.  What  did  he  have  to  do  with  this  business? 

Mr.  HUNTINGTON.  He  was  with  the  governor. 

Senator  MORGAN.  What  governor? 

Mr.  HUNTINGTON.  Stanford. 

Senator  MORGAN.  What  relations  did  he  have  with  Stanford  ? 

Mr.  HUNTINGTON.  He  got  some  money  every  month,  I  suppose. 

Senator  MORGAN.  Tripped  around  after  Stanford? 

Mr.  HUNTINGTON.  I  can  not  describe  the  man;  he  was  a  light-weight 
fellow. 

Senator  MORGAN.  He  was  at  work  for  Stanford,  was  he  I 

Mr.  HUNTINGDON.  I  never  knew  what  he  was  doing. 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS.          233 

Senator  MORGAN.  Brown,  I  see,  was  secretary  in  1873,  when  John 
Miller  succeeded  him  as  secretary  and  bookkeeper  of  the  Contract  and 
Finance  Company.  What  sort  of  a  man  was  Miller? 

Mr.  HUNTINGTON.  Miller  is  living. 

Senator  MORGAN.  What  sort  of  a  man  is  he?  Is  he  a  responsible 
man? 

Mr.  HUNTINGTON.  Well,  he  was  not  a  very  good  man.  He  had  one 
trial,  and  they  cleared  him.  I  went  to  California  and  saw  a  gentleman 
around  the  office  and  asked  who  it  was.  They  said  he  was  John  Miller. 
Perhaps  the  next  day  I  asked  him  what  they  gave  him.  and  they  said 
$5,000  a  year.  I  said  "You  give  him  either  too  much  or  too  little." 
They  asked  me  why.  I  said  "  In  a  day  or  two  I  will  find  out  what  he 
is  doing,"  and  I  told  Mr.  Crocker  to  put  an  expert  upon  his  books  right 
away.  I  waited  two  or  three  days,  and  the  expert  was  not  put  on;  so 
I  said  to  Crocker,  "I  will  get  a  man  if  you  do  not,"  and  he  set  a  man 
upon  Miller's  books.  This  is  a  matter  of  public  history  there,  but  I 
hardly  like  to  tell  it.  We  found  where  Miller  had  taken  wrongfully 
something  over  $700,000  of  money  of  the  Contract  and  Finance  Com- 
pany, and  we  got  but  half  of  it  back. 

Senator  MORGAN.  What  did  you  do  with  him? 

Mr.  HUNTINGTON.  They  tried  him,  and  I  believe  they  decided  that 
he  was  not  guilty. 

Senator  MORGAN.  Did  the  company  help  him  out  of  it? 

Mr.  HUNTINGTON.  No,  not  at  all;  not  in  the  least.  We  thought  he 
ought  to  have  been  found  guilty.  When  Mr.  Crocker  said  that  he  was 
a  thief,  I  said,  "No;  I  think  he  is  a  pretty  clever  fellow."  He  said, 
"Why?"  and  I  said  "Why,  because  he  did  not  get  a  wheelbarrow  and 
carry  off  every  brick  in  the  building." 

Senator  MORGAN.  You  say  that  Brown  was  a  pretty  good  man? 

Mr.  HUNTINGTON.  I  do  not  know  much  about  Brown ;  he  was  seem- 
ingly a  gentleman. 

Senator  MORGAN.  The  commissioners  say : 

Both  Mr.  Brown  and  Mr.  Miller  testified  that  before  Miller  took  charge  of  the 
books  William  E.  Brown  prepared  a  complete  and  new  set,  consisting  of  daybook, 
journal,  and  ledger,  into  which  set  of  hooks  he  personally  transcribed  all  the  bal- 
ances of  the  unclosed  accounts  contained  in  the  books  of  the  Contract  and  Finance 
Company.  These  books  have  since  been  produced  before  the  commission  and  the  fact 
is  as  stated. 

Have  you  ever  seen  those  books? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  You  have  no  knowledge  what  they  contained? 

Mr.  HUNTINGTON.  I  did  not  know  there  were  any  such  books. 

Senator  MORGAN.  You  do  not  know  what  they  contained  in  relation 
to  your  accounts? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  But  if  Mr.  Brown  made  the  transcript,  you  would 
suppose  that  it  was  fairly  done? 

Mr.  HUNTINGTON.  I  should  be  inclined  to  think  so. 

Senator  MORGAN  (reading) : 

w  John  Miller  testified  that  he  saw  the  books  both  of  the  Contract  and  Finance 
Company  and  of  Charles  Crocker  &  Co.  in  their  usual  place  in  the  rooms  occupied 
by  the  Contract  and  Finance  Company;  that  he  was  personally  in  charge  of  the 
room  during  the  day  on  which  they  disappeared;  that  he  left  the  room  for  a  short 
time  at  the  lunch  hour,  leaving  Mr.  Brown  there,  and  that  on  his  return  the  books 
had  disappeared.  William  E.  Brown  denies  any  knowledge  of  their  whereabouts  or 
of  the  circumstances  of  their  disappearance. 

Do  you  know  anything  about  their  whereabouts  or  the  circumstances 
of  their  disappearing? 


234  GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  No;  I  do  not. 

Senator  MORGAN.  Are  you  not  the  only  man  living  who  had  an 
interest  in  those  books? 

Mr.  HUNTINGTON.  Of  all  the  old  directors  of  the  Central  Pacific 
Eailroad  Company  I  guess  that  I  am.  1  think  that  Benjamin  Crocker 
is  living,  and  he  had  some  interest  in  them,  I  believe.  He  was  not  in 
the  management  of  the  Central  Pacific,  but  I  think  he  had  some  inter- 
est in  it. 

Senator  MORGAN.  Mr.  Crocker,  the  commissioners  say,  "  gives  it  as 
his  opinion  that  the  books  were  destroyed  by  Mark  Hopkins  as  having 
no  value." 

Mr.  HUNTINGTON.  The  rooms  were  cumbered  up,  and  I  said  to  Mark 
Hopkins,  "Why  not  get  rid  of  these  books  and  papers'?  I  would  not 
have  the  room  cumbered  up  with  them." 

Senator  MORGAN.  Where  were  you  when  you  said  that? 

Mr.  HUNTINGTON.  I  should  think  (as  my  memory  runs  back)  that  I 
was  in  the  hardware  and  metal  store  of  Huntington  &  Hopkins,  in 
Sacramento;  I  should  think  I  was. 

Senator  MORGAN.  Were  those  books  of  which  you  speak  in  Sacra- 
mento or  in  San  Francisco  1 

Mr.  HUNTINGTON.  In  Sacramento. 

Senator  MORGAN.  You  were  not  in  that  particular  room,  were  you? 

Mr.  HUNTINGTON.  Not  at  the  time.  I  do  not  think  I  was  ever  in  the 
rooms  of  the  Contract  and  Finance  Company,  I  was  very  busy  when 
I  was  there. 

Senator  MORGAN.  If  you  were  not  in  the  room  how  could  you  know 
that  it  was  lumbered  up? 

Mr.  HUNTINGTON.  It  is  a  mild  climate  there  and  the  rooms  were 
always  open. 

Senator  MORGAN.  How  did  it  become  a  matter  of  sufficient  impor- 
tance or  significance  to  you  that  you  should  recommend  to  Mr.  Hopkins 
that  this  room,  which  you  had  never  been  in,  should  be  emptied  of  what 
it  contained? 

Mr.  HUNTINGTON.  It  is  quite  natural.  I  am  always  watching  little 
things,  and  I  let  large  things  take  care  of  themselves.  I  suppose  it 
came  up  out  of  their  wanting  more  room. 

Senator  MORGAN.  You  have  stated  already  that  this  was  a  rented 
room? 
.    Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Could  you  not  easily  have  rented  another  room  in 
Sacramento  ? 

Mr.  HUNTINGTON.  If  we  occupied  one  room  with  a  lot  of  worthless 
material  we  would  have  to  pay  rent  for  it  all  the  same. 

Senator  MORGAN.  And  you  wanted  to  save  expense? 

Mr.  HUNTINGTON.  Well,  I  always  do  that. 

Senator  MORGAN.  These  other  rooms  in  the  building,  were  they  also 
littered  up  ? 

Mr.  HUNTINGTON.  There  was  none  of  them  perhaps  littered  with 
dead  business. 

Senator  MORGAN.  That  means  that  this  business  was  all  wound  up? 

Mr.  HUNTINGTON.  I  understood  that  they  had  wound  up. 

Senator  MORGAN.  Absolutely? 

Mr.  HUNTINGTON.  I  suppose  absolutely  would  be  the  word. 

Senator  MORGAN.  No  transactions  left  open  at  all  ?     ' 

Mr.  HUNTINGTON.  As  I  understood,  the  business  was  all  closed  and 
the  company  was  disincorporated. 


GOVERNMENT  DEBT  OP  THE  PACIFIC  RAILROADS.       235 

Senator  MORGAN.  Was  its  charter  repealed? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  By  an  act  of  the  legislature! 

Mr.  HUNTINGTON.  No;  it  might  be  by  an  act  of  the  legislature. 

Senator  MORGAN.  Do  you  not  recollect  that  the  charter  was  dis- ! 
solved  by  an  act  of  the  legislature? 

Mr.  HUNTINGTON.  I  do  not. 

Senator  MORGAN.  In  what  way  could  you  dissolve  a  charter  unless 
by  an  act  of  the  legislature,  or  by  a  decree  of  the  court? 

Mr.  HUNTINGTON.  I  think  you  can.  I  thought  there  was  a  way  to 
disincorporate  a  company  under  the  statute.  I  may  be  wrong. 

Senator  MORGAN.  How  long  was  it  after  you  had  given  this  advice 
to  Hopkins  before  these  books  disappeared? 

Mr.  HUNTINGTON.  I  do  not  know;  I  would  not  swear  positively  that 
I  knew  they  were  taken  out  of  the  room  at  all.  I  stayed  there  only 
two  or  three  days. 

Senator  MORGAN.  Did  you  ever  hear  of  any  of  these  books  and  papers 
being  in  the  hands  of  any  junk  dealer  or  merchant  who  wanted  to  use 
them  for  wrapping  paper  ? 

Mr.  HUNTINGTON.  I  hardly  think  they  would  be  valuable  for  wrap- 
ping paper.  Their  most  value  would  be  to  be  ground  up  and  used  as 
paper  stock. 

Senator  MORGAN.  Did  you  have  any  paper  mill  there? 

Mr.  HUNTINGTON.  My  impression  is  there  was. 

Senator  MORGAN.  If  these  books  and  papers  had  been  ground  up 
for  paper  stock,  or  if  they  had  been  sold  to  a  junk  dealer 

Mr.  HUNTINGTON.  I  hardly  think  they  would  have  been  worth  any- 
thing except  for  paper  stock. 

Senator  MORGAN.  You  are  not  entirely  indifferent  to  public  opinion, 
are  you? 

Mr.  HUNTINGTON.  I  have  often  said  that,  as  long  as  one  man  in  the 
world  thought  well  of  me  I  would  not  care  what  the  balance  of  the 
human  race  thought,  and  that  I  would  not  exchange  the  good  opinion 
of  one  man  for  the  opinion  of  the  whole  human  race. 

Senator  MORGAN.  You  would  take  the  opinion  of  that  one  man? 

Mr.  HUNTINGTON.  I  would  take  the  opinion  of  0.  P.  Huntington. 

Senator  MORGAN.  You  must  be  a  happy  man,  considering  how  much 
C.  P.  Huntington  thinks  of  you. 

Mr.  HUNTINGTON.  I  am ;  and  I  go  to  sleep  with  great  satisfaction. 

Senator  MORGAN.  I  am  glad  you  do.    The  commissioners  say: 

Putting  all  these  facts  together — the  existence  of  a  strong  motive  on  the  part  of 
Stanford,  Huutington,  Hopkins,  and  Crocker  to  suppress  the  books;  the  impossi- 
bility for  accounting  for  their  disappearance,  except  in  pursuance  of  the  act  or 
direction  of  one  of  these  four  persons;  the  evidence  of  Yost  that  he  saw  Hopkins 
engaged  in  packing  the  books  in  boxes;  the  evidence  of  John  Miller  of  their  sud- 
den disappearance,  and  the  statement  of  Mr.  Crocker  connecting  their  disap- 
pearance with  Mark  Hopkins — it  is  impossible  to  avoid  the  conclusion  that  the 
suppression  of  these  books  has  been  intentional  and  willful. 

Mr.  HUNTINGTON.  As  to  that  I  do  not  know.  But  certainly  if  I  had 
supposed  that  the  books  would  have  been  wanted  I  should  not  have 
had  them  burned,  because  I  am  satisfied  that  there  was  nothing  in  the 
books  (although  I  never  saw  them)  which  did  not  show  that  the  work 
was  well  done  by  the  Contract  and  Finance  Company,  and  that  a  better 
work  was  never  done.  I  should  like  to  have  those  books  to  show  what 
great  results  were  brought  about  for  so  little.  In  fact,  they  would  show 
that  the  work  was  done  for  a  smaller  amount  of  assets  than  such  work 
Lad  ever  been  done  before  under  similar  circumstances. 


236  GOVERNMENT   DEBT    OF   THE   PACIFIC    RAILROADS. 

Senator  MORGAN.  I  am  sorry  that  such  a  casual  remark  to  Hopkins 
has  deprived  you  of  such  valuable  testimony. 
Mr.  HUNTINGDON.  I  regret  it  more  than  you  do. 
SENATOR  MORGAN.  The  commissioners  say  further — 

in  estimating,  therefore,  the  actual  cost  of  construction  of  the  Central  Pacific  Rail- 
road, of  any  of  the  branches  which  were  constructed  through  contracts  with  the 
Contract  and  Finance  Company,  of  any  repairs  done  by  that  company  or  supplies 
furnished  by  it,  wo  feel  compelled  to  accept  the  rule  at  law  which  applies  to  all 
cases  of  suppressed  evidence,  and  which  raises  against  the  party  implicated  in  the 
suppression  the  very  strongest  presumption  that  the  suppressed  evidence,  if  pro- 
duced, would  testify  against  the  party  suppressing  the  same. 

Then  the  commissioners  say : 

It  is  our  judgment  that  the  actual  cost  of  construction  of  the  Central  Pacific  Rail- 
road from  Sacramento  to  Promontory  Point  and  the  purchase  from  the  Union  Pacific 
Railroad  of  47£  miles,  a  total  distance  of  737.5  miles,  did  not  exceed  the  sum  of 
$36,000,000. 

Mr.  HUNTINGTON.  Now,  in  the  nature  of  things,  Senator  Morgan, 
you  can  see,  I  think,  that  the  commissioners  did  not  know  anything 
about  it.  Nobody  could  tell  anything  about  it.  We  had  but  forty- 
four  millions  in  gold  to  do  that  work  with.  The  work  there  was  paid 
for  in  gold,  and  the  like  work,  in  my  opinion,  was  never  done  better  or 
cheaper.  The  commissioners  did  not  know  anything  about  it. 

Senator  MORGAN.  But  I  never  have  been  able  to  find  out  from  you 
whether  you  spent  the  whole  $44,000,000,  or  whether  you  had  some 
residuum  left  after  you  got  through. 

Mr.  HUNTINGTON.  Any  set  of  men  who  understood  anything  about 
the  building  of  railroads,  and  who  understood  the  difficulties  of  con- 
structing the  Central  Pacific  road,  would  see  that  the  work  must  have 
been  handled  remarkably  well. 

Senator  MORGAN.  But  you  are  stating  now  what  the  road  ought  to 
have  cost,  and  would  have  cost  in  the  hands  of  ordinarily  efficient  men, 
while  I  am  trying  to  get  at  the  fact  of  what  it  actually  did  cost. 

Mr.  HUNTINGTON.  There  are  certain  results.  There  is  the  work  and 
there  is  what  it  cost,  and  there  never  was  so  clean  a  piece  of  work  done 
in  the  world.  The  men  who  signed  that  report  did  not  know  anything 
about  it  and  could  not  know  anything  about  it.  We  had  one  avalanche 
out  there  that  covered  up  nineteen  men. 

Senator  MORGAN.  I  do  not  want  to  hear  all  about  that. 

Mr.  HUNTINGTON.  But  that  is  part  of  the  history  of  the  road. 

Senator  MORGAN.  That  is  a  diversion  from  the  question. 

Mr.  HUNTINGTON.  I  am  right  on  the  question. 

Senator  MORGAN.  Very  good.  Proceed  until  you  have  exhausted 
your  statement  and  I  will  ask  the  question  again. 

Mr.  HUNTINGTON.  I  will  hear  the  question  again. 

Senator  MORGAN.  Then  I  will  ask  it.  How  much  of  this  forty-four 
millions  of  gold  did  you  actually  expend  in  the  construction  of  the  Cen- 
tral Pacific  Eailroad  f 

Mr.  HUNTINGTON.  It  is  quite  safe  to  say  that  it  was  all  expended. 

Senator  MORGAN.  Then  you  claim  that  you  paid  out  in  gold  for  that 
road  as  much  as  you  realized  from  the  sale  of  the  first  and  second 
mortgage  bonds? 

Mr.  HUNTINGTON.  A  good  deal  of  it  was  not  paid  in  gold.  We 
bought  material  on  this  side,  and  it  took  a  good  deal  of  currency  to  pay 
for  it. 

Senator  MORGAN.  Your  statements  have  been  hitherto  all  based  on 
gold? 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS.  237 

Mr.  HUNTINGTON.  No,  excuse  me.  I  said  that  all  the  work  and 
materials  in  California  were  paid  for  in  gold.  I  said  that  all  the  pay- 
ments in  California  were  in  gold.  I  stick  to  that.  But  we  did  not  pay 
for  rails  in  gold.  If  we  had  there  would  not  have  been  money  enough. 

Senator  MORGAN.  Then  I  will  change  the  form  of  my  question  so  as 
to  cover  that  new  statement.  I  wish  now  to  know  how  much  money  in 
gold  or  greenbacks  or  currency  of  any  kind  you  realized  from  the  sale 
of  these  first  and  second  mortgage  bonds. 

Mr.  HUNTINGTON.  I  can  not  say  in  dollars  what  we  received. 

Senator  MORGAN.  Did  you  realize  more  than  $46,000,000? 

Mr  HUNTINGTON.  I  should  think  we  did,  considerably  more,  in 
currency. 

Senator  MORGAN.  Did  you  not  realize  as  much  as  $46,000,000  in  gold? 

Mr.  HUNTINGTON.  We  did  not  put  into  gold  any  more  than  was 
necessary. 

Senator  MORGAN.  That  does  not  answer  the  question.  I  want  to 
know  if  you  realized  as  much  as  $46,000,000  in  gold. 

Mr.  HUNTINGTON.  I  do  not  know.  I  would  have  to  go  back  thirty 
years  and  look  up  the  quotations  in  the  New  York  gold  market,  and 
they  did  not  stand  two  days  at  the  same  figure. 

Senator  MORGAN.  I  did  not  expect  that  your  mind  would  retain  the 
exact  amount  of  gold  and  currency  which  you  realized,  but  as  to  the 
sum  total,  I  think  you  should  be  able  to  state  how  much  you  realized. 

Mr.  HUNTINGTON.  No;  I  would  not  carry  it  in  my  head.  We  bought 
gold  as  low  as  we  could,  and  we  closed  the  transaction. 

Senator  MORGAN.  I  recall  you  again  to  the  statement  made  by  the 
commissioners  that  the  cost  of  the  Central  Pacific  Railroad  did  not 
exceed  the  sum  of  $36,000,000. 

Mr.  HUNTINGTON.  They  did  not  know  anything  about  it.  What 
they  say  was  probably  what  they  gathered  on  the  street  corners,  and  it 
was  the  best  information,  probably,  that  they  could  get.  But  it  cost  more 
than  that,  very  much  more  than  that. 

Senator  MORGAN.  I  have  tried  on  a  dozen  or  twenty  occasions  to  get 
you  tell  how  much  it  did  cost.  I  ask  you  again. 

Mr.  HUNTINGTON.  I  can  not  tell  you. 

Senator  MORGAN.  I  will  ask  you,  now,  finally,  so  as  to  get  rid  of  this 
subject,  to  state  as  nearly  as  you,  can  what  that  line  of  railroad,  737.50 
miles,  cost  for  construction  and  equipment. 

Mr.  HUNTINGTON..  I  should  say  that  the  road  cost  (it  is  merely  a 
guess),  from  San  Jose  to  Ogden,  somewhere  about  in  the  neighborhood 
of  between  $80,000,000  and  $90,000,000.  That  was  part  in  gold  and 
part  in  currency. 

Senator  MORGAN.  Take  that  737.50  miles  from  Sacramento  to  Ogden; 
what  did  that  cost? 

Mr.  HUNTINGTON.  It  is  impossible  for  me  to  tell  what  it  cost,  thirty 
years  after  it  has  been  built. 

Senator  MORGAN.  You  who  are  interested  in  the  road  to  the  extent 
of  millions  of  dollars  are  unable  to  state  how  much  it  did  cost,  and  yet 
you  say  that  the  commissioners  who  report  that  it  did  not  cost  more 
than  $36,000,000  based  their  report  upon  information  picked  up  on  the 
street  corners. 

Mr.  HUNTINGTON.  They  must  have  done  so,  from  their  figures.  I  do 
not  believe  that  Mr.  Anderson  or  Mr.  Littler  would  have  stated  any- 
thing but  what  they  thought  was  right. 

Senator  MORGAN.  If  it  was  so  difficult  for  those  gentlemen  to  get  at 
the  cost  of  the  road,  what  must  we  think  about  you  who  are  directly 
interested  in  it  and  are  unable  to  state  what  it  did  cost? 


238  GOVERNMENT   DEBT    OF   THE   PACIFIC   RAILROADS. 

Mr.  HUNTINGTON.  What  inducement  would  I  have  in  remembering, 
thirty  years  after  the  road  was  built,  what  it  cost? 

Senator  MORGAN.  You  see  that  I  am  simple  enough  to  have  an 
inducement  which  justifies  me  in  putting  the  question. 

Mr.  HUNTINGTON.  If  I  knew  I  would  be  glad  to  tell  you. 

Senator  MORGAN.  Then  you  do  not  know? 

Mr.  HUNTINGTON.  I  do  not  know,  and  no  man  living  could  begin  to 
tell  you  the  cost,  after  thirty  years. 

Senator  MORGAN.  But  it  was  at  the  close  of  these  transactions,  and 
when  you  had  finished  the  road  and  had  it  all  equipped  and  in  opera- 
tion, that  the  division  of  the  stock  of  the  Central  Pacific  took  place,  in 
which  division  Stanford  testifies  you  each  got  thirteen  millions  of  stock. 

Mr.  HUNTINGTON.  I  do  not  believe  that.  I  think  Governor  Stanford 
was  mistaken.  I  have  no  idea  that  he  would  testify  to  anything  which 
he  did  not  believe,  but  he  would  not  be  likely  to  have  known  very  much 
about  it,  and  I  have  no  idea,  either,  that  the  stock  was  distributed.  As 
I  recollect,  the  stock  was  sold  in  blocks,  and  the  whole  thing  was,  I  may 
say,  in  a  pool  and  never  was  segregated.  I  sold  the  shares,  but  I  never 
sold  a  share  of  my  own  without  the  shares  of  the  others  being  sold  too. 
I  am  sure  that  all  these  blocks  of  stock  belonging  to  the  company  were 
sold  and  that  I  never  sold  a  block  of  my  own. 

Senator  MORGAN.  I  am  giving  ycm  a  full  opportunity  under  oath  to 
impeach  this  report  of  the  commissioners. 

Mr.  HUNTINGTON.  I  understand,  and  I  am  very  much  obliged  to  you 
for  it. 

Senator  MORGAN.  The  commissioners  proceed  to  say : 

We  base  this  conclusion  on  the  examination  of  many  witnesses  as  to  the  actual 
cost  of  railroad  building  and  material  during  the  years  of  construction,  on  the  evi- 
dence taken  of  the  character  of  the  country,  on  the  agreed  price  paid  by  the  Central 
Pacific  to  the  Union  Pacific  for  47£  miles  of  the  road  between  Promontory  Point  and 
a  point  5  miles  west  of  Ogden ;  and  in  reaching  this  conclusion  we  have  made,  in 
our  judgment,  full  allowance  for  all  that  appears  in  the  evidence  relating  to  the 
peculiar  and  difficult  character  of  the  work,  to  the  excessive  cost  of  building  the 
road  over  the  Sierra  Nevadas,  to  the  impediments  offered  by  snow  and  stormy 
weather,  to  the  unusual  item  of  cost  arising  out  of  the  construction  of  snowsheds, 
and  to  the  increased  cost  resulting  from  the  rapidity  with  which  the  work  was 
carried  on  and  the  necessity  of  expensive  and  unusual  transportation  of  all  material 
required  for  the  construction  of  the  road. 

Mr.  HUNTINGTON.  That  is  very  nicely  stated. 

Senator  MORGAN.  Is  it  true? 

Mr.  HUNTINGTON.  Who  are  the  men  that  they  got  their  information 
from  ? 

Senator  MORGAN.  They  have  given  the  depositions  of  all  the  men. 

Mr.  HUNTINGTON.  Have  they  given  their  names? 

Senator  MORGAN.  I  can  furnish  you  their  names  by  reference  (but  it 
would  take  an  hour  or  two)  to  all  the  depositions  which  this  commis- 
sion took.  The  commissioners  swore  witnesses  and  they  were  them- 
selves sworn  officers. 

Mr.  HUNTINGTON.  I  would  like  to  know  the  men  whose  testimony 
they  took. 

Senator  MORGAN.  It  will  stand  you  in  good  stead,  inasmuch  as  you 
have  the  opportunity  of  impeaching  this  report,  to  read  the  depositions. 
They  are  all  on  file. 

Mr.  HUNTINGTON.  I  would  like  to  have  the  names  of  the  men. 

Senator  MORGAN.  I  am  not  here  to  furnish  them  to  you. 

Mr.  HUNTINGTON.  It  is  said  that  we  had  received  forty  millions  from 
the  State  of  California,  whereas  all  that  we  received  was  $400,000. 


I 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS.  239 

Senator  MORGAN.  That  was  not  in  a  report  made  to  the  Government 
or  made  under  oath.  That  was  in  a  report  made  by  gentlemen  who 
had  been  selected  at  a  public  meeting  in  San  Francisco  to  represent 
the  people  of  California. 

Mr.  HUNTINGTON.  Fifty-two  men.    They  would  have  sworn  to  it. 

Senator  MORGAN.  You  say  that  there  were  fifty- two  men  in  one  of 
these  meetings.  I  do  not  know  which  meeting  you  refer  to. 

Mr.  HUNTINGTON.  I  refer  to  the  one  in  which  the  State  was  raked 
over  for  delegates. 

Senator  MORGAN.  These  gentlemen  have  stated  that  there  were  as 
many  as  15,000  people  turned  away. 

Mr.  HUNTINGTON.  That  is  another  meeting.  I  do  not  think  that 
one-fourth  of  that  number  of  men  ever  got  together  there.  At  their 
last  great  meeting  they  got  fifty-two  men,  as  I  was  told,  and  as  I 
believe. 

Senator  MORGAN.  But  this  is  a  sworn  report,  from  sworn  officers  of 
the  Government,  made  on  the  sworn  testimony  of  witnesses.  In  this 
volume,  running  from  page  4  to  page  1010,  there  are  a  great  number  of 
depositions,  among  which  I  find  your  deposition,  and  I  suppose  you 
had  a  knowledge  of  what  you  swore  to. 

Mr.  HUNTINGTON.  I  do  not  think  I  ever  read  it,  although  I  may 
have  read  it  and  signed  it. 

Senator  MORGAN.  That  was  the  reason  for  my  asking  you  whether 
you  were  entirely  indifferent  to  public  opinion,  and  you  said  that  you 
were,  except  as  to  the  opinion  of  0.  P.  Huntington. 

Mr.  HUNTINGTON.  I  said  that  when  I  did  the  right  thing,  and  was 
satisfied  with  myself,  then  I  did  not  yield  to  public  opinion. 

Senator  MORGAN.  These  commissioners,  in  making  their  report,  state 
that  they  had  made  due  allowance  for  all  the  difficulties  in  the  way, 
including  the  snow  shed  and  the  tremendous  difficulties  that  existed  in 
the  construction  of  this  very  magnificent  work,  but  that,  after  making 
allowance  for  all  those  difficulties  and  weighing  the  testimony  (includ- 
ing your  own  and  that  of  Leland  Stanford  and  of  Mark  Hopkins)  they 
came  to  the  conclusion  that  the  construction  of  the  Central  Pacific 
Eailroad  for  the  distance  of  737£  miles,  including  the  47£  miles  pur- 
chased from  the  Union  Pacific  Company,  did  not  exceed  the  sum  of 
$36,000,000.  Now,  if  you  can  show  that  that  statement,  or  that  con- 
clusion, is  in  any  respect  unjust  to  you  or  to  your  associates/  or  in  any 
respect  unfair,  you  have  the  full  opportunity  to  do  it  now. 

Mr.  HUNTINGTON.  I  say  that  the  commissioners  did  not  know  any- 
thing about  it,  but  I  know  all  about  it  in  a  general  way.  The  work 
was  not  done,  in  my  opinion,  for  more  than  twice  that  money.  The 
commissioners  did  not  know  what  was  paid  for  materials  or  for  freight 
or  for  insurance,  or  for  other  things. 

Senator  MORGAN.  It  was  impossible  that  they  could  not  know  any- 
thing about  it  when  they  had  sworn  you  as  a  witness  and  examined 
you. 

Mr.  HUNTINGTON.  They  did  not  ask  me  what  we  paid  for  rails  or 
what  it  cost  to  get  timber  for  the  snow  sheds.  I  answered  their  ques- 
tions to  the  best  of  my  ability,  but  they  did  not  know  how  to  ask  the 
questions;  and  if  I  had  gone  on,  it  would  have  taken  a  month  for  me 
to  tell  them  what  I  paid  for  railroad  ties  and  sleepers,  and  bolts,  and 
plates,  and  spikes,  and  the  material  necessary,  and  for  freighting  and 
insurance,  or  the  cost  of  transferring  materials  from  San  Francisco  up 
the  Sacramento  River  and  hauling  it  by  teams  across  the  Sierra  Nevada 
Mountains.  They  did  not  ask  me  these  questions.  If  they  did,  I  could 


240  GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS. 

have  told  them  pretty  Dearly;  and  they  would  not  have  set  down  the 
total  amount  at  $30,000,000. 

Senator  MORGAN.  Do  you  really  know  whether  they  asked  you  these 
questions  or  not? 

Mr.  HUNTINGTON.  I  am  pretty  sure  they  did  not,  if  they  came  to  any 
such  conclusion. 

Senator  MORGAN.  If  they  asked  you  the  questions  which  covered  all 
these  inquiries,  your  mind  was  fresher  then,  and  you  could  have 
answered  them1? 

Mr.  HUNTINGTON.  I  could  tell  pretty  well  to-day,  even,  because  I  have 
been  dealing  in  these  things  right  along  and  they  are  more  particularly 
in  my  line. 

Senator  MORGAN.  We  do  not  want  statements  that  are  only  "pretty 
well"  true. 

Mr.  HUNTINGTON.  I  might  not  be  able  to  get  it  exactly,  but  I  could 
tell  pretty  nearly,  to  the  best  of  my  knowledge  and  belief. 

Senator  MORGAN.  You  say  that  the  commissioners  did  not  know  how 
to  ask  the  questions? 

Mr.  HUNTINGTON.  They  would  not  have  had  time  to  go  into  the 
whole  question  of  building  the  Central  Pacific  Railroad,  the  cost  of 
laying  the  road,  laying  the  rails,  and  all  that  sort  of  thing,  not  at  a 
thousand  but  at  ten  thousand  points. 

Senator  MORGAN.  Here  are  33  pages  of  printed  matter  containing 
nothing  else  than  the  questions  asked  you  and  your  answers,  so  that 
the  commissioners  must  have  taken  some  time  in  examining  you. 

Mr.  HUNTINGTON.  Thirty-three  pages  of  testimony  would  hardly  get 
on  to  the  edge  of  it,  I  think. 

Senator  MORGAN.  The  questions  asked  you  relate  to  very  important 
matters  including  both  money  and  reputation. 

Mr.  HUNTINGTON.  My  reputation  they  never  were  looking  out  for ; 
I  take  care  of  that  myself. 

Senator  MORGAN.  But  when  a  man  is  on  the  witness  stand  and  his 
reputation  is  assailed  he  is  always  careful,  of  course,  or  he  ought  to 
be,  to  protect  it.  Now,  then,  while  you  were  in  that  situation  were  you 
holding  back  in  order  that  the  commissioners  might  put  to  you  the  ques- 
tions which  would  drive  the  nail  on  the  head,  or  were  you  there  to  tell 
the  whole  story? 

Mr.  HUNTINGTON.  I  presume  that  it  struck  me  at  the  time  that  it 
was  not  much  of  their  business  to  know  what  I  had  been  doing  for  the 
last  twenty  years. 

Senator  MORGAN.  Then  you  assumed  toward  the  commissioners  of 
the  Government  an  attitude  of  defiance? 

Mr.  HUNTINGTON.  Not  at  all.  I  answered  their  questions  to  the  best 
of  my  ability. 

Senator  MORGAN.  Do  you  mean  to  say  that  if  the  commission  had 
asked  you  questions  more  specific  and  definite  you  would  have  given 
different  answers  ? 

Mr.  HUNTINGTON.  If  they  had  asked  me  what  rails  cost,  I  would 
have  told  them. 

Senator  MORGAN.  Perhaps  they  did  not  want  to  know. 

Mr.  HUNTINGTON.  Perhaps  not;  I  think  they  were  pretty  nice  gen- 
tlemen, two  of  them. 

Senator  MORGAN.  As  to  Pattison,  you  have  not  any  opinion  at  all, 
I  suppose? 

Mr.  HUNTINGTON.  Pattison  may  have  been  a  good  fellow  j  I  will  not 
say  anything  about  him, 


GOVERNMENT   DEBT   OF   THE   PACIFIC   EAILROADS.  241 

Senator  MORGAN.  I  will  ask  you  to  say  something  about  him,  and 
about  his  report  too,  before  we  get  through. 

Mr.  HUNTINGTON.  All  right. 

Senator  MORGAN.  The  commission  obtained  your  statement,  and,  as 
I  understand  from  you,  your  statement  did  not  cover  the  whole  facts, 
because  you  did  not  see  proper  to  disclose  them  ? 

Mr.  HUNTINGTON.  No;  you  have  no  reason  or  business  to  draw  such 
a  conclusion. 

Senator  MORGAN.  If  I  have  no  reason  to  draw  such  a  conclusion, 
then,  of  course,  your  deposition  before  the  commission  was  the  truth, 
and  the  whole  truth,  and  nothing  but  the  truth? 

Mr.  HUNTINGTON.  Every  question  which  was  asked  me  I  answered 
to  the  best  of  my  ability. 

Senator  MORGAN.  But  questions  which  they  did  not  happen  to  ask 
you  you  did  not  answer,  and  you  did  not  disclose  what  you  knew  about 
matters  germane  to  these  questions. 

Mr.  HUNTINGTON.  I  do  not  think  that  as  a  rule  volunteer  testimony 
is  particularly  good. 

Senator  MORGAN.  If  it  is  truth  it  does  not  make  much  diiference 
whether  it  is  volunteer  testimony  or  not. 

Mr.  HUNTINGTON.  Of  course  a  man  is  not  likely  to  tell  anything  but 
the  truth  when  he  is  under  oath. 

Senator  MORGAN.  Do  you  think  that  a  man,  situated  as  you  were  on 
this  occasion,  should  shelter  himself  behind  that  excuse  and  say  that 
he  did  not  answer  a  question  because  it  was  not  put  in  as  specific  a 
form  as  required  him  to  make  the  statement? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Are  you  prepared  to  say  that  your  former  deposi- 
tion was  a  full,  complete,  and  honest  statement,  or  that  it  was  an  incom- 
plete and  untruthful  statement? 

Mr.  HUNTINGTON.  I  do  not  say  anything  about  it;  I  say  that  what- 
ever questions  were  asked  me  I  answered  to  the  best  of  my  ability. 

Senator  MORGAN.  And  you  stopped  there? 

Mr.  HUNTINGTON.  Yes ;  I  stopped  there. 

Senator  MORGAN.  I  read  from  this  report : 

As  this  investigation  is  not  in  the  nature  of  an  accounting,  it  seems  unnecessary  to 
detail  the  facts  and  the  figures.  Mr.  Stanford's  admission  is  tlwit  the  $54,000,000  of 
stock  distributed  by  the  Contract  and  Finance  Company  was  substantially  a  net 
profit  subject  only  to  the  liquidation  of  an  indebtedness  of  the  Contract  and  Finance 
Company  not  exceeding  $3,000,000.  (See  evidence  of  Stanford,  vol.  5,  p.  2669; 
William  E.  Brown,  vol.  5,  p.  2979.) 

Do  you  give  Mr.  Stanford  credit  for  being  an  honest  man,  who  would 
tell  the  truth? 

Mr.  HUNTINGTON.  I  think  that  Leland  Stanford  would  always  tell 
the  truth,  to  the  best  of  his  knowledge  and  belief. 

Senator  MORGAN.  Did  he  not  have  knowledge  of  this  matter  sufficient 
to  tell  the  truth  ? 

Mr.  HUNTINGTON.  He  did  not.  He  did  not  understand  what  he  was 
talking  about  when  we  got  through  building  the  road.  I  do  not  know 
how  much  stock  we  did  have,  but  I  know  that  the  Contract  and  Finance 
Company  figured  up  what  was  due,  and  found  that  it  would  not 
begin  to  pay  the  debts  of  the  Contract  and  Finance  Company;  but 
in  making -up  the  figures  the  other  day,  to  the  best  of  my  knowledge, 
I  said  that  I  would  be  very  liberal,  and  I  put  the  shares  of  the  Central 
Pacific  stock  at  10  cents.  I  do  not  believe  they  would  have  brought  5 
cents  at  the  time.  I  have  an  idea  that  if  I  had  offered  them  at  5  cents 
p  R J6 


242  GOVERNMENT   DEBT    OF    THE   PACIFIC    RAILROADS. 

a  share  when  the  road  was  finished  I  could  not  have  sold  them  at  that 
figure.  The  Union  Pacific  shares  changed  hands,  as  much  as  the  whole 
capital,  at  8  cents.  I  was  offered  a  majority  of  these  shares  at  7  cents 
and  I  would  not  take  them. 

Senator  MORGAN.  Still  you  said  that  when  you  made  a  settlement 
of  the  affairs  of  the  Contract  and  Finance  Company  you  made  some 
money1? 

Mr.  HUNTINGTON.  Yes;  but  that  was  ten  years  later.  We  carried 
the  debt  along,  and  after  the  road  was  built  we  had  to  pay  more 
interest  on  our  debt.  We  paid  10  per  cent  for  some  of  it,  and  we  held 
it  until  the  stock  appreciated  in  value 5  then  we  sold.  But  when  the 
road  was  completed  I  know  that  the  Central  Pacific  shares  would  not 
have  brought  5  per  cent,  and  10  per  cent  on  these  shares  would  have 
been  needed  to  pay  the  debts  of  the  Contract  and  Finance  Company. 

Senator  MORGAN.  You  have  undertaken  to  deny  the  statement  of 
Mr.  Stanford  that  $54,000,000  of  stock  was  distributed  to  the  Contract 
and  Finance  Company  and  was  substantially  a  net  profit? 

Mr.  HUNTINGTON.  I  do  not  recollect  its  distribution.  There  was 
quite  a  lot  of  stock,  and  it  was  sold  largely  in  blocks  and  the  debts 
were  paid,  and  at  the  filial  outcome  the  balance  was  distributed. 

Senator  MORGAN.  If  you  can  not  make  any  more  definite  statement 
about  it  than  that 

Mr.  HUNTINGTON.  Is  not  that  pretty  clear? 

Senator  MORGAN.  It  is  pretty  clear  that  you  do  not  know. 

Mr.  HUNTINGTON.  I  say  that  I  know  the  stock  would  not  have 
brought  10  per  cent.  I  do  not  believe  it  would  have  brought  5  per  cent, 
and  that  would  not  have  paid  the  debts  which  the  Contract  and  Finance 
Company  owed  at  that  time. 

Senator  MORGAN.  Still  there  may  have  been  $54,000,000  of  the  stock 
distributed,  even  though  it  was  not  worth  10  per  cent? 

Mr.  HUNTINGTON.  I  do  not  recollect  its  being  delivered. 

Senator  MORGAN.  In  the  undefined  condition  of  your  memory  about 

Mr.  HUNTINGTON.  My  memory  is  very  clear  about  it. 

Senator  MORGAN.  Yes,  as  to  value,  but  as  to  the  amount  of  stock 
delivered  to  the  Contract  and  Finance  Company,  you  think  it  was  about 
$00,000,000? 

Mr.  HUNTINGTON.  I  do  not  think  it  was  so  much  as  that.  I  told  you 
yesterday  that  I  think  it  was  about  $50,000,000. 

Senator  MORGAN.  When  you  say  you  think,  I  want  to  know  what 
you  mean.  I  am  asking  you  for  your  recollection  of  facts. 

Mr.  HUNTINGTON.  The  amount  of  stock  was  about  $50,000,000,  which 
belonged  to  the  Contract  and  Finance  Company,  but  I  think  part  of 
it  came  from  the  Charles  Crocker's  unfinished  contract.  The  Contract 
and  Finance  Company  may  have  taken  (in  taking  over  Charles  Crock- 
er's unfinished  contract)  his  shares,  possibly  all  of  them,  but  I  think 
not.  In  a  general  way  I  knew  what  was  going  on. 

Senator  MORGAN.  Mr.  Stanford  seems  to  have  stated  in  his  deposi 
tion  "that  this  $54,000,000  of  stock  distributed  by  the  Contract  and 
Finance  Company  was  substantially  a  net  profit,  subject  only  to  the 
liquidation  of  an  indebtedness  of  the  Contract  and  Finance  Company, 
not  exceeding  $3,000,000." 

Mr.  HUNTINGTON.  I  do  not  suppose  the  Governor  knew  what  the 
indebtedness  was.  The  indebtedness  was  twice  as  much  as  that  in 
New  York.  If  he  said  that  he  positively  knew  it  was  $3,000,000  he 
ought  not  to  have  said  so. 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS.          243 

Senator  MORGAN.  And  you  say  that  you  positively  know  that  it  was 
more  than  $3,000,000? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  much  was  it? 

Mr.  HUNTINGTON.  It  was  a  large  amount — over  $10,000,000.  I  know 
that  the  interest  which  I  had  to  pay  on  it  was  much  more  than  I  wanted 
to  pay. 

Senator  MORGAN.  Here  is  another  point  which  the  commissioners 
mention : 

The  existence  of  this  indebtedness  can  hardly  bo  said  to  be  satisfactorily  proved 
in  the  absence  of  the  books  It  appears,  moreover,  positively  proved  from  tho  books 
of  the  Central  Pacific  Railroad  Company  that  during  the  construction  of  the  road 
tho  Central  Pacific  Railroad  Company  had  paid  to  the  Contract  and  Finance  Com- 
pany, in  lieu  of  a  part  of  its  cash  payments,  the  sum  of  $6,000,000  in  notes.  (See 
Steveus's  report,  No.  7,  vol.  8.)  It  appears  also  that  in  1871  those  notes  were 
still  in  the  possession  of  the  Contract  and  Finance  Company  (see  evidence  of  E.  H. 
Miller,  jr.,  p.  3438),  and  that  they  were  paid  by  an  issue  of  land-grant  bonds  deliv- 
ered to  that  company  at  the  rate  of  86^  per  cent,  the  rate  being  fixed  in  this,  as  in 
all  cases,  by  the  vote  of  Stanford,  Huutington,  Hopkins,  and  Crocker.  (See  evidence 
of  Stevens,  vol.  6,  p.  3532.) 

Mr.  HUNTINGTON.  I  do  recollect  something  about  that.  That  was  a 
transaction  in  San  Francisco,  and  it  was  a  matter  out  there,  and  not 
a  matter  in  New  York.  I  had  forgotten  about  it;  I  am  not  positive 
now,  but  I  think  I  have  some  recollection  of  it.  That  probably  is  the 
$3,000,000  which  Governer  Stanford  refers  to.  The  indebtedness  in 
New  York  was  the  indebtedness  of  the  Contract  and  Finance  Company. 
I  think  that  is  the  way  it  works  out;  I  think  it  is. 

Senator  MORGAN.  You  do  not  question  the  justice  of  the  commis- 
sioners7 conclusions  about  it? 

Mr.  HUNTINGTON.  If  the  Governor  says  it  was  done  there,- he  would 
probably  know. 

Senator  MORGAN.  I  am  speaking  about  the  report  of  the  commission. 
You  do  not  question  that  part  of  it? 

Mr.  HUNTINGTON.  I  do  not  know  anything  about  it  myself. 

Senator  MORGAN.  It  seems,  then,  according  to  this  statement  and 
according  to  other  statements,  that  you  took  from  the  Central  Pacific 
all  the  subsidy  bonds  of  the  United  States,  all  the  first-mortgage  bonds, 
nearly  all  the  stock,  and  $6,000,000  in  notes? 

Mr.  HUNTINGTON.  No;  that  is  not  as  I  recollect.  I  think  that  we 
took  all  the  bonds,  then  1  think  that  the  Contract  and  Finance  Company 
was  paid  in  cash  so  much  and  in  stock  so  much  j  so  the  bonds  had  to 
be  sold,  and  the  probability  is  that  they  did  not  realize  enough  to  pay 
the  cash  part  of  the  payment,  and  that  the  deficit  came  in  in  that  way. 

Senator  MORGAN.  Was  the  work  which  was  done  by  the  Contract 
and  Finance  Company  to  be  paid  one-half  in  cash  and  one-half  in  stock! 
,  Mr.  HUNTINGTON.  Very  likely  it  was  so. 

Senator  MORGAN.  And  not  in  bonds  ? 

Mr.  HUNTINGTON.  I  should  have  said  in  bonds.  I  was  in  New  York, 
and  the  contract  was  made  in  San  Francisco. 

Senator  MORGAN.  Did  you  have  the  bonds  of  the  Central  Pacific 
Company  in  New  York  ? 

Mr.  HUNTINGTON.  If  the  bonds  belonged  to  the  Central  Pacific  Com- 
pany, I  handled  them  as  an  officer  of  that  company.  I  was  not  a 
director  in  the  Contract  and  Finance  Company,  but  I  was  vice-president 
of  the  Central  Pacific,  and  handled  the  bonds  for  that  company. 

Senator  MORGAN.  Then,  as  fast  as  you  would  sell  the  bonds  of  the 
Central  Pacific  you  would  turn  over  the  proceeds  to  the  credit  of  the 
Contract  and  Finance  Company! 


244  GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS. 

Mr.  HUNTING-TON.  No.  The  Central  Pacific  would  have  the  credit 
of  the  proceeds,  and  would  place  the  amount  in  San  Francisco  accord- 
ing to  agreement. 

Senator  MOKGAN.  But  the  transaction  was  of  that  character  that 
when  the  bonds  were  sold  by  you  the  money  went  to  the  Contract  and 
Finance  Company  ? 

Mr.  HUNTINGTON.  I  should  say  that  that  was  so. 

Senator  MORGAN.  You  paid  the  amount  in  New  York? 

Mi1.  HUNTINGTON.  It  had  to  be  paid  there;  wherever  it  was  paid  it 
made  no  difference. 

Senator  MORGAN.  When  you  sold  the  bonds  of  the  Central  Pacific 
you  turned  over  the  proceeds  to  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  I  have  said  no,  unless  they  were  their  bonds. 

Senator  MORGAN.  I  do  not  know  whether  they  were  their  bonds  or 
not.  What  did  you  do  with  the  money? 

Mr.  HUNTINGTON.  I  paid  it  where  it  belonged. 

Senator  MORGAN.  Where  did  it  belong  ? 

Mr.  HUNTINGTON.  If  the  bonds  belonged  to  the  Central  Pacific  the 
money  went  to  that  company ;  and  if  they  belonged  to  the  Contract  and 
Finance  Company  the  money  went  there. 

Senator  MORGAN.  To  which  company  did  it  belong? 

Mr.  HUNTINGTON.  I  am  inclined  to  think  that  it  belonged  to  the 
Central  Pacific,  and  that  the  money  went  to  that  company.  I  kept  the 
accounts  and  sent  them  to  California  at  the  end  of  every  month. 

Senator  MOIIGAN.  Were  the  proceeds  of  these  bonds  used  for  any 
other  purpose  than  the  construction  and  equipment  of  the  Central 
Pacific  Railroad  1 

Mr.  HUNTINGTON.  No ;  I  am  quite  sure  they  were  not.  I  do  not  think 
the  money  was  ever  used  except  for  the  construction  of  the  road. 

Senator  MORGAN.  Then  you  understood  from  the  beginning  that  the 
Government  subsidy  bonds,  the  bonds  which  the  company  issued,  and 
the  stock  of  the  company  (with  some  small  reservation)  and  $6,000,000 
of  notes  were  intended  to  construct,  complete,  and  equip  the  Central 
Pacific  road ;  and  that,  when  the  money  on  the  bonds  and  stock  was 
realized  it  was  due  to  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  It  could  not  be  diverted  to  any  other  purpose; 
but  the  $0,000,000  of  notes,  I  do  not  know  anything  about.  That  trans- 
action might  have  come  out  of  a  higher  price  for  gold  or  a  lower  price 
for  bonds. 

Senator  MORGAN.  You  think  that  the  $0,000,000  in  notes  grew  out 
of  the  high  price  of  gold? 

Mr.  HUNTINGTON.  Yes;  or  the  low  price  of  bonds. 

Senator  MORGAN.  That  is  to  say,  that  the  bonds  held  by  the  Contract 
and  Finance  Company  were  held  by  them  at  their  face  value  in  payment 
for  their  work  ? 

Mr.  HUNTINGTON.  I  do  not  understand  you.  The  Central  Pacific 
Company  agreed  to  pay  the  Contract  and  Finance  Company  so  much 
money.  As  I  understand,  the  Contract  and  Finance  Company  did  not 
have  the  bonds.  The  Central  Pacific  sold  the  bonds  and  paid  the  Con- 
tract and  Finance  Company  so  much,  in  cash,  for  building  the  road, 
and  so  many  shares  of  stock.  The  stock  went  directly  to  the  Contract 
and  Finance  Company;  but  it  would  seem  that  the  bonds  belonged  to 
the  Central  Pacific,  and  that  the  Contract  and  Finance  Company  had 
nothing  to  do  with  them.  They  were  sold  for  cash,  and  that  cash  was 
paid  over  to  the  Contract  and  Finance  Company  as  part  payment. 

Senator  MORGAN.  Then  the  $G3000?000  of  notes  which  this  report  of 


the 


GOVERNMENT   DEBT    OF    THE    PACIFIC   RAILROADS.          245 


the  commission  says  the  Central  Pacific  Company  had  given  to  the  Con- 
tract and  Finance  Company,  in  lieu  of  a  part  of  its  cash  payment,  was 
the  difference  between  the  face  value  of  the  bonds  and  the  gold  value 
of  the  bonds  ? 

Mr.  HUNTINGDON.  No  5  I  do  not  say  that. 

Senator  MORGAN.  I  understood  you  to  say  that. 

Mr.  HUNTINGTON.  You  are  mistaken,  or  I  was  mistaken.  The  Con- 
tract and  Finance  Company  did  not  have  anything  to  do  with  the  face 
value  of  the  bonds.  When  the  bonds  were  sold,  if  the  company  wanted 
gold  the  gold  was  bought  on  the  account  of  the  Central  Pacific  Com- 
pany and  was  paid  to  the  Contract  and  Finance  Company.  The  bonds 
did  not  sell  for  par.  The  first  sales,  I  think,  were  at  90.  They  may 
have  been,  though,  95.  There  were  not  many  sold  at  90.  Some  were 
sold  at  par,  but  very  few  above  par,  and  that  was  a  matter  entirely  for 
the  Central  Pacific  Company. 

Senator  MORGAN.  About  the  $6,000,000  of  notes;  what  was  the 
consideration  for  these  notes'? 

Mr.  HUNTINGTON.  They  came  short,  as  I  understand,  of  getting 
gold  enough  out  of  those  bonds  to  pay  what  was  due  to  the  Contract 
and  Finance  Company,  and  therefore  the  Central  Pacific  gave  these 
notes  for  the  difference. 

Senator  MORGAN.  You  mean  the  difference  between  the  gold  value 
of  the  bonds  for  wbich  they  were  sold  and  the  face  value  of  the  bonds'? 

Mr.  HUNTINGTON.  It  would  be  a  better  way  to  say  the  difference 
between  what  was  received  from  the  bonds  and  what  was  due  to  the 
Contract  and  Finance  Company.  What  was  received  from  the  bonds 
did  not  buy  gold  enough  to  pay  what  was  due  to  the  Contract  and 
Finance  Company.  Is  not  that  a  better  way  to  state  it? 

Senator  MORGAN.  No,  sir. 

Mr.  HUNTINGTON.  I  can  not  answer  it  the  other  way.  We  did  not 
get  enough  from  the  bonds  to  pay  the  gold  which  we  owed  to  the  Con- 
tract and  Finance  Company.  I  do  not  see  the  difference. 

Senator  MORGAN.  I  have  asked  you  what  the  consideration  was,  and 
you  said  you  thought  it  might  be  that  the  Central  Pacific  Company 
was  deficient  in  money  to  keep  up  with  the  cash  payment  to  the  Con- 
tract and  Finance  Company. 

Mr.  HUNTINGTON.  That  they  did  not  realize  enough  from  the  bonds 
to  pay  the  gold. 

Senator  MORGAN.  And  that,  therefore,  they  gave  their  notes  for  the 
difference  between  the  product  of  the  bonds  and  the  face  value  of  the 
bonds'? 

Mr.  HUNTINGTON.  For  the  difference  between  whs/:  they  got  for  the 
bonds  and  what  they  owed  to  the  Contract  and  Finance  Company. 

Senator  MORGAN.  The  Commissioners  say: 

It  appears  also  that  in  1871  these  notes  were  still  iu  the  possession  of  the  Contract 
and  Finance  Company,  and  that  they  were  paid  by  an  issue  of  land-grant  bonds  deliv- 
ered to  that  company  at  the  rate  of  86£  per  cent. 

Mr.  HUNTINGTON.  I  do  not  think  1  was  there  at  the  time ;  but,  if  I 
had  been  there,  that  would  have  been  about  right. 

Senator  MORGAN.  So  that,  in  addition  to  all  the  stock  of  the  company, 
and  all  thebonds  of  the  company,  the  Contract  and  Finance  Company  got 
an  additional  issue  of  land-grant  bonds  at  the  rate  of  86£  per  cent? 

Mr.  HUNTINGTON.  That  is  about  right,  I  should  think. 

Senator  MORGAN.  For  the  payment  of  the  six  million  of  notes? 

Mr.  HUNTINGTON.  I  do  not  remember  about  the  amount. 

Senator  MORGAN.  What  was  done  with  these  laud-grant  bonds! 


24G  GOVERNMENT   DEBT   OF   THE    PACIFIC   KAIL-ROADS. 

Mr.  HUNTINGDON.  They  were  sent  to  me  in  New  York  and  1  sold 
them  toward  paying  the  debt  due  to  the  Contract  and  Finance  Com- 
pany. 

Senator  MORGAN.  How  many  of  them  did  you  sell? 

Mr.  HUNTINGTON.  I  do  not  recollect  how  many,  but  I  remember  that 
there  were  some  land- grant  bonds  sold. 

Senator  MORGAN.  Did  you  sell  them  for  as  much  as  86£  per  cent  on 
the  face  value? 

Mr.  HUNTINGTON.  I  think  so.  I  think  some  of  them  went  as  low  as 
81  per  cent,  but  others  went  higher,  and,  of  late  years,  they  went  some- 
thing over  par.  I  think  that  is  about  the  right  price.  I  think  they 
sold  not  much  over  90.  The  bonds  that  we  kept  had  appreciated. 

Senator  MORGAN.  Are  these  land-grant  bonds  still  outstanding? 

Mr.  HUNTINGTON.  I  think  that  about  eight  millions  have  been 
redeemed  by  the  sale  of  lands. 

Senator  MORGAN.  That  would  be  about  the  amount  you  would  give 
for  the  payment  of  the  $6,000,000  of  debt. 

Mr.  HUNTINGTON.  We  had  nothing  to  do  with  that.  When  the 
bonds  were  sold  they  went  out  and  belonged  to  the  holders. 

Senator  MORGAN.  But  you  got  the  bonds  and  sold  them? 

Mr.  HUNTINGTON.  We  sold  them  right  off'  as  quickly  as  we  could  get 
sale  for  them.  We  never  had  six  millions  of  them;  I  mean  of  that  issue 
to  the  Contract  and  Finance  Company. 

Senator  MORGAN.  The  commissioners  say  in  this  report  that  the 
Central  Pacific  Railroad  Company  turned  over  these  land-grant  bonds 
at  the  rate  of  86£  per  cent  to  the  Contract  and  Finance  Company. 

Mr.  HUNTINGTON.  Very  likely  that  is  right;  I  do  not  remember 
about  it. 

Senator  MORGAN.  That  would  be  about  $7,000,000.  When  you  sold 
these  bonds  you  got  money  for  them? 

Mr.  HUNTINGTON.  Naturally. 

Senator  MORGAN.  And  they  are  still  outstanding,  as  far  as  you  know? 

Mr.  HUNTINGTON.  Something  over  seven  millions  of  the  land-grant 
bonds  have  been  redeemed.  They  are  coming  in  from  time  to  time. 
As  we  sell  lands  we  redeem  bonds.  I  am  speaking  of  the  Central 
Pacific  Company. 

Senator  MORGAN.  How  many  bonds  overhang  this  land  grant  now? 

Mr.  HUNTINGTON.  Of  that  issue? 

Senator  MORGAN.  Of  all  the  issues. 

Mr.  HUNTINGTON.  There  are,  I  think,  from  memory,  about  two  and  a 
half  millions  of  them  out.  But  there  are  about  twelve  millions  of  the  5 
per  cent  bonds. 

Senator  MORGAN.  Overhanging  the  real  estate? 

Mr.  HUNTINGTON.  Yes;  a  mortgage  on  the  railroad. 

Senator  MORGAN.  These  are  outstanding  now? 

Mr.  HUNTINGTON.  Yes;  about  $14,000,000  in  all. 

Senator  MORGAN.  How  many  of  the  bonds  have  been  redeemed? 

Mr.  HUNTINGTON.  Ten  millions  of  the  first  issue,  and  some  of  the 
others;  I  do  not  know  exactly  how  many;  as  I  recollect,  there  are 
about  twelve  millions  outstanding. 

Senator  MORGAN.  Then,  of  the  land-grant  bond  issue  (which  is  a 
mortgage  on  the  lands  granted  by  the  Government),  about  seven  mil- 
lions of  the  bonds  came  into  the  possession  of  the  Contract  and  Finance 
Company? 

Mr.  HUNTINGTON.  I  will  not  say  about  the  amount,  only  there  were 
some  of  them  I  know  that  did. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  247 

Senator  MORGAN.  And  the  balance  of  that  issue  of  bonds  (of  which 
there  are  about  $14,000,000  outstanding)  were  sold  in  the  market? 

Mr.  HUNTINGTON.  They  were  sold  in  the  market. 

Senator  MORGAN.  What  was  done  with  the  money1? 

Mr.  HUNTINGTON.  As  I  was  saying,  there  has  been  a  good  deal  of 
work  done  from  time  to  time  by  the  Central  Pacific,  and  the  money  has 
been  expended  on  it. 

Senator  MORGAN.  It  was  carried  to  the  treasury  of  the  Central 
Pacific  and  expended  in  work? 

Mr.  HUNTINGTON.  Yes.  There  is  no  iron  now  in  any  of  the  main 
tracks  of  the  line.  They  are  all  steel,  and  much  of  it  76  pounds. 

Senator  MORGAN.  Have  dividends  been  declared  on  the  stock  of  the 
Central  Pacific? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  much  have  you  received  in  dividends? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  About  how  much? 

Mr.  HUNTINGTON.  I  can  not  say,  but  a  considerable  amount. 

Senator  MORGAN.  I  do  not  know  what  " considerable"  means. 

Mr.  HUNTINGTON.  I  do  not  know  how  much  I  have  received  in  divi- 
dends. The  Central  Pacific  paid  dividends  right  along  from  1873  or 
1874  until  the  competition  from  the  Union  Pacific  and  other  roads 
became  so  great  as  to  cut  rates  down. 

Senator  MORGAN.  About  how  many  years  was  the  Central  Pacific 
paying  dividends? 

Mr.  HUNTINGTON.  I  can  not  say;  about  seven  or  eight  years,  perhaps. 

Senator  MORGAN.  What  was  the  average  amount  that  you  got  per 
annum  on  your  stock? 

Mr.  HUNTINGTON.  It  varied.  I  may  have  got  10  per  cent,  but  1  do 
not  think  I  did.  I  was  thinking  that  we  got  up  to  the  legal  rate  of 
interest  in  California  at  one  time. 

Senator  MORGAN.  I  am  speaking  about  the  average  sum  of  money 
which  you  received  in  dividends  annually  from  the  Central  Pacific 
stock  ? 

Mr.  HUNTINGTON.  I  can  not  get  at  the  average,  and  I  can  not  get 
at  the  extremes  either;  but  we  got  considerable. 

Senator  MORGAN.  I  am  speaking  about  you,  not  "  we."  Did  you  use 
the  word  because  you  and  Stanford  and  those  other  men  were  identi- 
fied with  each  other? 

Mr.  HUNTINGTON.  I  frequently  say  "we"  when  I  should  say  "I,"  and 
"I"  when  I  should  say  "we." 

Senator  MORGAN.  I  suppose  that  you  are  impressed  by  the  recollec- 
tion that  in  all  of  these  transactions  all  four  of  you  were  as  one  man 
having  an  equal  interest? 

Mr.  HUNTINGTON.  Nearly  the  same.  I  do  not  think  that  our  inter- 
ests ran  just  the  same. 

Senator  MORGAN.  But  very  close  ? 

Mr.  HUNTINGTON.  I  know  that  we  four  men  stood  under  and  carried 
the  road  through  when  we  would  have  liked  to  have  other  men  stand 
under. 

Senator  MORGAN.  What  was  the  average  amount  of  dividends 
which,  during  ten  years,  "we  four  men  who  stood  under"  received  from 
the  Central  Pacific  Railroad  Company? 

Mr.  HUNTINGTON.  I  do  not  recollect.  It  may  have  been  sometimes 
10  per  cent,  but  I  do  not  believe  it  averaged  8  per  cent,  and  it  may  not 
have  averaged  even  6  per  cent.  The  road  did  very  well  for  some  time. 


248  GOVERNMENT    DEBT    OF   THE    PACIFIC   RAILROADS. 

Senator  MORGAN.  What  was  the  aggregate  amount  of  money  which 
"we  four  who  stood  under"  received  out  of  the  stock  annually  in  the 
way  of  dividends'? 

Mr.  HUNTINGTON.  You  have  used  the  word  "  we  "  there,  but  I  have 
no  objection  to  your  doing  so.  I  think  we  had  commenced  selling 
our  stock,  and  I  do  not  know  just  how  much  we  had;  but  the  road  paid 
very  well,  and  I  should  think  that  perhaps  I  myself  may  have  received 
in  dividends  one  million  or  perhaps  two  millions.  I  do  not  know;  I  was 
in  great  operations  in  other  roads  at  that  time.  The  amount  of  divi- 
dends was  considerable,  I  know. 

Senator  MORGAN.  During  the  ten  years? 

Mr.  HUNTINGTON.  Yes;  I  do  not  think  that  the  dividends  were  run- 
ning as  long  as  ten  years. 

Senator  MORGAN.  I  will  assume  that  the  dividends  ran  for  ten  years 
and  that  you  got  two  millions  out  of  them. 

Mr.  HUNTINGTON.  I  do  not  know  that  I  did. 

Senator  MORGAN.  That  would  be  $20,000,000  for  each  of  you  during 
the  ten  years. 

Mr.  HUNTINGTON.  Not  two  millions  a  year,  two  millions  for  the  ten 
years;  that  would  be  eight  millions. 

Senator  MORGAN.  Would  you  undertake  to  say  that  the  four  gentle- 
men whom  you  spoke  of,  in  those  ten  years  or  during  the  years  that  the 
Central  Pacific  Company  was  paying  dividends,  only  got  eight  millions 
in  dividends — the  four  of  you  ? 

Mr.  HUNTINGTON.  I  should  think  we  got  more. 

Senator  MORGAN.  How  much  more  should  you  think? 

Mr.  HUNTINGTON.  I  do  not  know;  I  should  think  more. 

Senator  MORGAN.  About  how  much  more? 

Mr.  HUNTINGTON.  I  do  not  want  to  say. 

Senator  MORGAN.  You  may  not  want  to  say 

Mr.  HUNTINGTON.  Perhaps  that  was  not  the  proper  word  for  me  to 
use.  We  may  have  got  more.  Let  me  see.  There  were  more  dividends 
than  that  paid — a  good  deal  more.  The  company  paid,  I  think,  alto- 
gether $30,000,000  in  dividends.  No;  it  could  not  have  been  that 
much.  I  am  not  clear  in  my  mind.  No;  it  was  not  as  much  as  that, 
but  it  was  considerable.  I  do  not  like  to  state  the  amount,  for  I  have 
not  got  it  clear  in  my  mind. 

Senator  MORGAN.  Inasmuch  as  you  are  the  only  survivor  of  those 
four  gentlemen,  I  would  like  you  to  give  your  best  recollection  of  how 
much  you  four  got  in  dividends  out  of  that  road. 

Mr.  HUNTINGTON.  I  would  not  be  willing  to  say  that  we  got  more  than 
than  $2,000,000  apiece.  That  would  be  eight  millions,  and  still  we  may 
have  got  more.  There  was  a  good  deal  more  paid  by  the  company,  but 
our  stock  went  out.  As  we  got  a  chance  to  sell  it,  we  sold,  and  I  am 
quite  sure,  from  the  prices  which  we  got  for  the  stock,  that  dividends 
must  have  been  paid  at  the  time. 

Senator  MORGAN.  Were  these  dividends  forced,  or  were  they  the 
actual  honest  distribution  of  the  income  of  the  road  after  the  payment 
of  all  fixed  charges  and  current  liabilities? 

Mr.  HUNTINGTON.  They  must  have  been  the  legitimate  income  out 
of  the  earnings  of  the  road.  At  one.time  the  road  did  very  well. 

Senator  MORGAN.  You  earned  the  money,  and  paid  the  fixed  charges 
and  current  liabilities,  and  then  you  declared  dividends? 

Mr.  HUNTINGTON.  We  always  did  that.  I  say  so  more  from  the 
rule  I  have  in  doing  my  business  than  from  recollecting  the  actual  facts. 

Senator  MORGAN.  And  your  difficulty  seems  to  arise  from  the  fact 
that  you  do  not  remember  when  you  began  selling  this  stock! 


GOVERNMENT   DEBT    OF   THE   PACIFIC   RAILROADS.  249 

Mr.  HUNTINGDON.  Yes. 

Senator  MORGAN.  When  do  you  recollect  selling  any  of  the  stock 
that  you  held? 

Mr.  HUNTINGTON.  I  can  not  say.  It  was  considerably  up  in  the 
seventies. 

Senator  MORGAN.  Before  you  sold  any  of  your  personal  stock? 

Mr.  HUNTINGTON.  Before  I  sold  any  of  the  Contract  and  Finance 
Company's  stock. 

Senator  MORGAN.  I  ain  not  speaking  of  the  stock  of  the  Contract 
and  Finance  Company.  I  am  speaking  of  the  Central  Pacific  Com- 
pany stock. 

Mr.  HUNTINGTON.  That  went  out  with  the  contract  to  build  the  road. 
The  Central  Pacific  paid  its  stock  to  the  Contract  and  Finance  Com- 
pany for  building  the  road ;  and  also  to  Charles  Crocker  and  to  seven 
contractors  from  Sacramento  to  Newcastle. 

Senator  MORGAN.  So  that  the  stock  left  the  ownership  of  the  Cen- 
tral Pacific  and  went  into  the  ownership  of  the  Contract  and  Finance 
Company? 

Mr.  HUNTINGTON.  Yes;  in  the  usual  way. 

Senator  MORGAN.  And  after  that  you  got  dividends  on  that  stock  in 
favor  of  the  Contract  and  Finance  Company,  I  suppose? 

Mr.  HUNTINGTON.  Yes;  of  course.  If  the  Contract  and  Finance  Com- 
pany owned  the  shares  it  must  have  taken  the  dividends. 

Senator  MORGAN.  You  got  the  dividends  from  the  Central  Pacific 
and  paid  them  over  to  the  Contract  and  Finance  Company  on  its  stock? 

Mr.  HUNTINGTON.  Of  course  the  dividends  were  paid  over  to  the 
owners  of  the  shares. 

Senator  MORGAN.  That  means  to  the  Contract  and  Finance  Com- 
pany? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  four  gentlemen  owned  the  Contract  and 
Finance  Company? 

Mr.  HUNTINGTON.  Largely.    I  do  not  think  we  had  the  last  shares. 

Senator  MORGAN.  Do  you  recollect  anybody  who  had  shares  in  the 
Contract  and  Finance  Company  besides  yourselves? 

Mr.  HUNTINGTON.  You  read  the  other  day  the  names  of  Ben.  Crocker 
and  others  who  had  some  shares  in  it.  I  think  that  was  so;  but  they 
were  not  large  shareholders. 

Senator  MORGAN.  Very  inconsiderable,  were  they  not? 

Mr.  HUNTINGTON.  Not  large;  not  large. 

Senator  MORGAN.  Got  to  the  Contract  and  Finance  Company,  which 
held  all  the  stock  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  Not  all.  The  whole  amount  of  stock  issued  was 
$100,000,000.  The  Contract  and  Finance  Company  could  not  have  had 
over  $43,000,000  unless  it  took  over  Mr.  Crocker's  contract.  If  it  did, 
it  had  more  stock;  if  it  did  not,  it  had  not  more  than  $43,000.000. 

Senator  MORGAN.  Whatever  the  sum  was,  the  Contract  and  Finance 
Company  got  the  dividends  for  the  stock. 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  got  the 
dividends  on  the  shares  it  owned. 

Senator  MORGAN.  Can  you  state  the  aggregate  amount  for  the  ten 
years,  or  for  either  of  the  ten  years  in  which  dividends  were  paid  on 
the  stock?  Can  you  state  the  aggregate  of  the  payments  which  you 
get  on  account  of  dividends  from  the  Central  Pacific? 

Mr.  HUNTINGTON.  Noj  I  can  not.    It  caine  in  with  other  matters. 


250  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Have  you  ever  read  the  report  of  the  United 
States  Pacific  Railroad  Commission  since  it  was  made? 

Mr.  HUNTINGTON.  I  do  not  think  I  ever  read  it.  I  have  been  very 
busy  about  current  matters  from  day  to  day.  I  have,  perhaps,  seen  the 
report,  and  run  it  over ;  but  I  do  not  think  I  ever  read  it. 

Senator  MORGAN.  There  are  quite  a  number  of  things  in  that  report 
which  I  would  like  to  give  you  an  opportunity  of  replying  to. 

Mr.  HUNTINGTON.  Anything  that  the  Senator  wants  to  ask  me  I 
will  answer.  For  my  own  part,  I  do  not  care  anything  for  the  report, 
because  I  am  all  right,  I  know;  but  anything  that  the  Senator  wants 
to  ask  me  I  will  answer  to  the  best  of  my  ability. 

Senator  MORGAN.  You  see,  we  have  got  to  vote  on  these  matters,  and 
I  want  to  get  information  about  them,  and  would  be  very  glad  for  you 
to  give  it  to  us.  Here  in  this  official  report;  and  I  am  sure  that  the 
House  and  Senate  will  be  obliged  to  adopt  it  unless  you,  having  the 
opportunity,  can  state  facts  which  will  turn  it  down  or  dispute  it.  I 
want  to  give  you  a  full  opportunity  to  do  that,  if  you  choose  to  avail 
yourself  of  it. 

Mr.  HUNTINGTON.  I  look  upon  most  of  those  reports  as  words  thrown 
into  the  air.  I  do  not  know  this  report  at  all,  but  I  have  heard  it 
talked  about.  I  was  before  the  Commission  three  or  four  days  myself. 

Senator  MORGAN.  Do  you  want  to  examine  this  report  and  to  examine 
your  former  deposition  contained  in  it,  in  order  that  you  may  make  a 
statement  to  correct  your  deposition,  or  to  dispute  the  report? 

Mr.  HUNTINGTON.  I  might  look  it  over,  but  I  do  not  think  I  care  to 
do  so. 

Senator  MORGAN.  I  will  assure  you  that,  in  the  absence  of  your  doing 
it  while  you  are  here  under  oath,  and  making  a  correct  statement,  the 
country  and  the  House  and  the  Senate  will  be  inclined  to  take  the 
report  of  the  Commissioners  as  containing  the  truth  in  full. 

Mr.  HUNTINGTON.  I  can  not  help  it. 

Senator  MORGAN.  You  can  help  it  if  you  want  to  deny  it. 

Mr.  HUNTINGTON.  I  deny  pretty  much  the  whole  thing.  The  Com- 
missioners  reported  the  facts  as  they  got  them;  but  they  could  not 
know  anything  about  them. 

Senator  MORGAN.  Are  you  contented  with  that  broad,  sweeping 
denial  of  the  Commissioners'  report  without  looking  at  it? 

Mr.  HUNTINGTON.  Perhaps  1  ought  to  look  it  over,  but  I  am  a  very 
busy  man.  The  Commissioners  bring  in  the  Sam  Brannon  report  (it  is 
of  about  the  same  character),  and  I  would  hardly  care  to  deny  it.  I  am 
willing  to  rest  with  what  we  have  done.  I  am  willing  to  rest  on  the 
broad  statement  of  the  facts  that  there  is  the  road  and  that  it  was  built 
for  so  much  money.  Any  fair  man  who  understands  the  situation  will 
see  that  the  work  was  well  done  and  cheaply  done. 

Senator  MORGAN.  I  will  have  the  volume  placed  in  your  possession. 

Mr.  HUNTINGTON.  I  do  not  believe  I  will  read  it  all  through. 

Senator  MORGAN.  No;  but  you  can  read  the  report  of  the  Commis- 
sion. It  is  my  duty  to  leave  it  with  you,  and  it  is  for  you  to  say  whether 
you  want  to  answer  it  or  not  to  answer  it. 

Mr.  HUNTINGTON.  I  will  get  some  of  my  folks  to  read  it  over  and 
show  me  any  points  which  have  a  bearing  on  this  matter. 

Senator  MORGAN.  Do  you  mean  your  lawyer? 

Mr.  HUNTINGTON.  Perhaps  not  a  lawyer;  somebody  in  the  office.  I 
work  about  fourteen  hours  a  day,  and  can  not  give  much  time  to  that 
kind  of  literature. 

Senator  MORGAN.  You  are  not  up  to  iny  standard  of  work,  for  I  work 
eighteen  hours  a  day* 


GOVERNMENT   DEBT    OP    THE    PACIFIC    RAILROADS.  251 

Mr.  ITuNTiNGTON.  I  think  I  have  averaged  more  than  twelve  hours 
a  day  for  sixty  years.  I  guess  that  will  beat  you. 

Senator  MORGAN.  I  can  go  on  and  carry  you  through  this  report,  as 
I  have  done  through  a  part  of  it,  and  can  examine  you  on  the  diiferent 
statements  which  affect  your  interests,  if  you  desire  me  to  do  so.  You 
seem  not  to  wish  to  examine  this  report  yourself. 

Mr.  HUNTINGDON.  I  am  sure  you  mistake  me.  I  would  like  to  examine 
it,  but  it  will  take  a  good  deal  of  time,  and,  if  you  will  allow  me  to  say 
so,  I  do  not  think  is  is  particularly  profitable  reading,  because,  as  I  say, 
I  rest  on  the  proof  of  what  I  have  done,  the  good  work  I  have  done,  and 
what  I  have  done  it  with.  It  was  remarkable  that  we  did  it  at  all. 
But  I  will  have  this  book  looked  over,  and  if  there  are  any  points  in  it 
which  I  ought  to  notice,  I  will. 

Senator  MORGAN.  It  is  not  the  points  which  your  lawyer  will  pick 
out  for  you  that  I  want  you  to  attend  to. 

Mr.  HUNTINGTON.  I  will  examine  the  book  carefully,  only  I  do  not 
want  to  read  anything  more  than  is  necessary.  I  will  take  someone 
about  the  office  who  is  familiar  with  our  methods  generally,  and  let 
him  read  it.  Almost  all  my  people  have  been  with  me  a  great  deal. 

Senator  MORGAN.  If  you  prefer  to  take  this  report,  read  it  over,  and 
examine  it  and  your  deposition,  and  then  come  before  this  committee 
and  make  a  statement  of  the  points  wherein  the  Commissioners  are 
correct  or  wherein  they  are  in  error;  wherein  they  are  truthful  or 
wherein  they  are  false — we  can  then  get  at  a  precise  knowledge  of  the 
differences  between  you  and  the  Commissioners  on  an  examination  of 
these  matters. 

Mr.  HUNTINGTON.  You  do  not  mean  the  Sam  Brannan  report? 

Senator  MORGAN.  I  have  not  seen  the  Sam  Brannan  report. 

Mr.  HUNTINGTON.  It  is  a  beauty.  The  Commissioners  may  have 
seen  it. 

•Senator  MORGAN.  But  if  you  do  not  want  to  do  that,  I  will  proceed 
with  your  examination. 

Mr.  HUNTINGTON.  I  will  be  guided  by  what  the  Senator  wants. 

Senator  MORGAN.  No;  I  have  tendered  you  the  opportunity  of  taking 
this  entire  report,  and  your  deposition,  and  examining  them  carefully, 
and  marking  the  points  on  which  you  differ  from  the  Commissioners; 
and  you  shall  have  the  benefit  of  your  denial  or  explanation. 

Mr.  HUNTINGTON.  I  will  be  guided  by  whatever  the  Senator  wants 
done. 

Senator  MORGAN.  What  I  want,  Mr.  Huntington,  is  to  put  the  Sen- 
ate of  the  United  States  in  possession  of  the  facts,  and  only  that.  I 
am  not  framing  an  argument  for  you  or  against  you.  I  want  to  give 
you  an  opportunity  to  explain  every  allegation  made  against  you  by 
everybody. 

Mr.  HUNTINGTON.  It  would  take  me  a  hundred  years,  I  guess,  to  do 
that:  for  I  have  had  enemies  all  my  life,  and  I  am  as  proud  of  my 
enemies  as  of  my  friends.  I  have  always  hewed  to  the  line. 

Senator  MORGAN.  Well,  sir,  if  you  like  to  read  this  report  over 

Mr.  HUNTINGTON.  I  will  read  it  myself  if  Senator  Morgan  wishes  it. 
I  will  take  it  to  my  library  at  nights  and  read  it  over  carefully,  and  any- 
thing that  you  would  care  to  know  about  I  will  look  at  carefully,  and 
will  comment  on  and  answer  it  all. 

Senator  MORGAN.  That  will  save  you  a  good  deal  of  time,  because, 
if  I  conduct  this  examination  throughout  as  it  has  been  progressing, 
we  will  be  here  day  after  day;  and  this  examination  of  the  Commis- 
sion's report  by  you  will  be  a  great  economy  of  time. 


252  GOVERNMENT   DEBT   OF   THE    PACIFIC   RAILROADS. 

Mr.  HUNTINGTON.  I  think  I  see  that  you  would  rather  I  would  do  it 
than  be  bothered  about  it  yourself,  and  I  will  do  it. 

Senator  MORGAN.  I  do  not  consider  it  any  bother  to  me.  Unfortu- 
nately I  have  been  put  in  a  position  here  where  I  am  compelled  to  ask 
you  a  great  many  questions  in  order  to  get  the  facts  before  the  country; 
and  I  thought  it  due  to  you,  and  I  think  so  yet,  that  you  should  have 
the  opportunity  of  contradicting,  under  oath,  any  part  of  this  report 
that  you  can  contradict. 

Mr.  HUNTINGTON.  That  seems  to  be  fair,  and  I  will  do  it. 

Senator  MORGAN.  So.  Mr.  Chairman,  in  order  to  give  Mr.  Hunting- 
ton  that  opportunity,  I  will  ask  the  committee  to  adjourn. 

The  committee  thereupon  adjourned  until  Friday  February  28,  at 
10.30  a.  m. 


WASHINGTON,  D.  0.,  Friday,  March  6, 1896. 

The  committee  met  at  10.30  a.  m.,  the  meeting  which  had  been  fixed 
for  Friday,  February  28,  having  failed  to  take  place  on  account  of  the 
indisposition  and  absence  of  Mr.  0.  P.  Huntington. 

Present:  Senators  Gear  (chairman),  Stewart,  Wolcott,  Frye,  and 
Morgan. 

The  chairman  stated  that,  before  resuming  the  examination  of  Mr. 
Huntington,  any  other  gentleman  present  who  desired  to  be  heard  on 
the  subject  of  the  inquiry  before  the  committee  had  now  an  opportunity 
to  be  heard. 

THE  UNION  PACIFIC. 

Mr.  JOHN  EOONEY,  of  New  York,  said  that  he  had  had  a  dispatch 
this  morning  from  Mr.  J.  L.  Morrison,  of  New  York,  counsel  for  the  first- 
mortgage  bondholders  of  the  Union  Pacific  Company,  stating  that  he 
could  not  appear  before  the  committee  to-day.  He  presented,  however, 
copies  of  the  supplemental  statement  on  behalf  of  the  first-mortgage 
bondholders.  This  paper  was  made  part  of  the  record,  and  is  as 
follows : 

PACIFIC  RAILROAD  DEBTS  TO  THE  GOVERNMENT  (FIRST  AND  SECOND  MORTGAGES) 
AND  TO  INDIVIDUAL  FIRST-MORTGAGE  BONDHOLDERS.  PLAN  FOR  COMPELLING 
THEIR  CASH  PAYMENT,  BY  FORECLOSURE  AND  REORGANIZATION,  TO  BE  ADMIN- 
ISTERED BY  GOVERNMENT  COMMISSIONERS.  THE  PRIVILEGE  TO  BE  CONFERRED 
ON  JUNIOR  BONDS,  AND  STOCKS  OF  THE  PRESENT  COMPANIES,  TO  RETAIN  THEIR 
INTERESTS,  BY  SUBSCRIBING  TO  NEW  ISSUES  OF  WELL-SECURED  OBLIGATIONS, 
WHOSE  PROCEEDS  ARE  TO  BE  USED  IN  PAYING  THE  FIRST  MORTGAGE  AND  GOV- 
ERNMENT DEBTS. 

On  behalf  of  first-mortgage  bondholders,  whose  security  identifies  them  in  interest 
•with  the  Government,  we  have  given  careful  consideration  to  all  the  arguments 
which  have  been  advanced  before  the  committees  of  Congress.  They  have  satisfied 
us  of  the  correctness  of  the  plan  for  the  maugemeut  by  Government  commissioners 
of  the  foreclosure  and  reorganization  of  these  properties;  through  assessments  on 
subordinate  interests,  for  the  cash  payment  of  the  first  and  second  mortgages.  Indeed, 
the  most  notable  result  of  the  extended  discussions  before  the  committees,  seems  to 
be  the  general  conviction  that  the  appraisal  of  the  pecuniary  value  of  these  hetero- 
geneous properties,  and  the  bargaining  over  their  price,  is  a  function  which  a  great 
parliamentary  body  should  reject,  and  should  relegate  to  administrative  officers. 
Therefore,  the  practical  disposition  of  this  Pacific  Railroad  problem  would  seem  to 
be  now  narrowed  to  the  two  following  propositions  embodied  in  their  respective 
bills: 

First.  The  plan  presented  on  behalf  of  first-mortgage  bondholders,  for  the  appoint- 
ment of  Government  commissioners  to  collect  the  first  and  second  mortgages, 
upon  the  lines  laid  down  by  Congress.  The  bill  requires  them  to  pursue  the  usual 
and  normal  method  for  realizing  on  great  corporate  mortgages — through  the  certain 


GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  253 

force  of  judicial  compulsion  ou  junior  claims — in  order  to  secure  the  payment  of 
prior  mortgages. 

Second.  The  plan  of  a  syndicate,  to  authorize  commissioners  and  the  President,  to 
assign  the  Government  mortgages  at  a  price  fixed  by  them.  Wo  will  endeavor  to 
point  out  the  essential  differences,  both  in  principle  and  practice,  between  these 
methods  of  disposing  of  the  Government's  property. 

The  syndicate  plan  is  impracticable  as  a  method  for  ascertaining  the  true  and  full 
value  of  the  first  mortgage  and  Government  interests.  This  bill  is  simply  the  out- 
come of  the  successive  efforts,  made  at  this  session,  to  obtain  advantageous  terms 
for  junior  bonds  and  stocks — as  will  be  apparent  from  the  plan  which  they  sub- 
mitted to  the  committees — to  advance  fourth-mortgage  bonds  to  the  rank  of  firsts, 
and  to  maintain  the  present  stock  interests  upon  their  mere  repayment  to  the  syndi- 
cate of  the  amount  which  it  advanced  for  first-mortgage  coupons. 

It  is  impossible  for  these  junior  claims  to  pay  the  Government,  or  its  commission- 
ers, the  full  value  of  its  interest,  and  at  the  same  time  secure  the  desired  advantages 
for  themselves.  They  want  to  divide  the  earnings  with  the  firsts  and  the  Govern- 
ment, and  not  take  the  secondary  chances  which  their  contracts  subject  them  to. 
It  is  useless  to  analyze  their  different  schemes  of  cheapening  the  Government's  inter- 
est, which  they  have  been  forced  to  relinquish.  It  may  suffice  to  point  out  that 
their  present  bill  is  merely  a  covert  form  for  accomplishing  the  same  result.  They 
now  propose  to  substitute,  for  the  ordinary  normal  method  of  realizing  on  a  great 
mortgage  interest,  the  plan  of  an  assignment  of  the  Government  mortgages,  based 
on  the  estimate  of  commissioners  and  the  President.  It  would  bo-impossible  for  any 
commission  to  make  a  proper  estimate  of  such  a  property  in  such  a  way.  The 
estimate  which  security  holders  place  upon  their  railroad  interests  always  include:, 
the  element  of  prospective  increase  of  earnings.  This  is  simply  the  financial  reflection 
of  the  belief  that  our  country  is  in  course  of  development. 

The  magnitude  of  this  element  of  value  is  tenfold  when  applied  to  the  PaciL'i 
Railroads — which  are,  just  at  present,  subject  to  a  diminution  of  nearly  30  per  cent; 
in  net  earnings— from  ten  and  a  half  to  seven  and  a  half  millions  of  dollars.  It  woulc  , 
no  doubt,  be  very  desirable  for  a  syndicate  to  buy  the  Government's  interest  on  the 
present  reduced  basis,  and  sell  it  out  in  a  year  or  two,  at  the  increased  price  produced 
by  the  resumption  of  prosperity.  Yet,  this  would  probably  follow  if  Congress  were 
to  pass  their  bill ;  for  how  are  commissioners  and  the  President  to  put  a  money  value 
on  this  prospective  increase  of  revenues?  It  may  come  at  any  moment,  from  a  slight 
increase  of  rates  of  freight,  or  from  any  of  the  hundred  causes  that  advance  our 
commercial  prosperity.  These  elements  being  essentially  indeterminate,  the  result  of 
this  commission  would  necessarily  be  the  sale  of  the  Government's  interest  at  far 
less  than  its  real  value.  (It  should  be  added  that  it  would  place  an  unheard  of  and 
dangerous  power  in  the  hands  of  administrative  officers,  however  exalted — the  power 
to  fix  the  value  of  a  claim  of  $165,000,000 — the  amount  of  the  first  mortgage  and 
Government  debts.)  But  it  is  just  this  prospective  increase  in  revenues  that  is  rep- 
resented by  the  junior  interests  in  the  property,  and  which  they  wish  to  retain  at 
the  least  cost.  Hence,  their  desire  for  this  method  of  appraising  the  Government's 
interest  at  a  minimum  price. 

BILL  FOR  GOVERNMENT  COMMISSIONERS  TO  EXECUTE  A  PLAN,  INDICATED  BY  CON- 
GRESS, FOR  THE  COMPULSORY  REDEMPTION  OF  THE  FIRST  AND  GOVERNMENT 
DEBTS  AT  PAR  IN  CASH.  THE  PAYMENTS  TO  BE  MADE  BY  THE  PRESENT  JUNIOR 
BONDHOLDERS,  AND  THE  STOCKHOLDERS,  WHO  SHALL  INVEST  THE  REQUISITE 
AMOUNTS  IN  INTEREST-BEARING  MORTGAGE  BONDS. 

This  plan,  propounded  in  the  bill  which  we  had  the  honor  to  submit,  is  simply  the 
application  to  the  collection  of  the  Government  mortgages  of  the  methods  pursued 
every  day  by  private  interests  in  railroads.  Practically,  there  can  be  no  competitive 
cash  bidding  for  such  colossal  properties.  The  best  market  of  the  creditors,  requir- 
ing the  adequate  payment  of  their  claims,  consists  in  the  junior  bonds  and  stocks, 
interested  to  save  their  equities  from  foreclosure.  In  the  case  of  these  railroads,  the 
earnings  furnish  to  the  junior  claimants  a  desirable  investment,  which  it  would  be 
folly  for  them  to  reject,  at  the  risk  of  losing  their  great  interest  in  the  probable 
increased  revenues  of  these  properties. 

With  these  certain  elements,  based  on  the  present  actual  earnings  of  the  aided 
divisions,  on  which  Congress  can  predicate  the  Government  plan  of  reorganization, 
why  resort  to  the  aleatory  method  of  authorizing  certain  officials  to  assess  the  value 
of  the  Government's  mortgages.  These  properties  are  worth  just  what  the  stocks 
will  pay  for  them  under  the  pressure  of  foreclosure.  This  can  not  be  ascertained 
except  by  process  of  foreclosure— modified  as  to  all  junior  interests,  by  providing 
them  with  substantial  securities  to  represent  their  proportions  of  the  redemption  of 
the  superior  liens.  It  is  upon  such  an  assured  basis  that  this  bill  proceeds;  provid- 
ing for  the  execution  of  the  necessary  administrative  details  by  commissioners. 


254  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

The  method  adopted  in  this  bill  is  simply  the  normal  course  contemplated  by  the 
contracts  for  the  benefit  of  creditors  who  have  stipulated  for  a  superior  mortgage, 
and  which  is  followed  by  business  men  every  day  in  the  year.  Why  should  the 
Government  alone  divest  itself  of  these  remedies?  These  great  properties  are  not 
worth  merely  what  any  three  or  four  worthy  officials  may  declare  them,  upon  prob- 
lematical data,  to  be  potentially  worth;  but  what  the  law  of  the  land,  acting  in  its 
ordinary  course  upon  subordinate  and  imperiled  interests,  may  actually  ascertain 
it  to  be  worth  to  them. 

In  corroboration  of  the  practical  nature  of  this  remedy  we  submit  the  following 
concrete  considerations,  which  bear  forcibly  upon  the  minds  of  stockholders  called 
upon  to  make  investments  in  such  new  securities  as  are  provided  in  this  plan. 

PRESENT  INCREASE   OP  REVENUES. 

The  recent  reports  for  the  completed  year  1895  show  a  rate  of  increase  in  Union 
Pacific  earnings  which  enhances  the  importance  to  the  stockholders  of  saving  their 
shares,  by  paying  the  Government  debts  through  subscriptions  to  substituted  bond 
issues  of  intrinsic  value. 

Increase  of  price  of  junior  securities  has  always  followed  the  payment  of  heavy 
assessments  and  the  restoration  of  the  solvency  of  the  companies.  In  this  way  the 
stock  has  generally  promptly  recouped  itself  for  its  outlay,  which  in  this  case  would 
be  a  result  additional  to  the  investment  in  a  desirable  security. 

SUCCESS    OF  THE  ASSESSMENT    PLAN  WHEN    EMPLOYED    BY  INDIVIDUAL    MORTGAGE 
HOLDERS  NOW  INVOKED  FOR  THE   GOVERNMENT  AND  ITS  FELLOW  INTERESTS. 

The  New  York  Times  of  February  9  contains  such  apposite  material  on  this  point 
that  we  venture  to  quote  from  it: 

"If  the  Government  had  simply  asked  payment  in  the  same  way  that  a  corporation 
asks  payment  for  an  issue  of  its  securities,  that  is,  by  certified  checks,  it  would  never 
have  been  anything  but  a  question  of  how  many  times  over  the  loan  would  have 
been  subscribed.  For  the  sum  of  $100,000,000  is  but  a  drop  in  the  bucket  as  com- 
pared with  the  wealth  of  the  country.  See  the  proof  of  it.  Three  bankrupt  corpo- 
rations have  just  called  upon  certain  classes  of  their  security  holders  for  new  money, 
in  the  way  of  assessments  and  otherwise — not  to  buy  Government  bonds,  but  to  pre- 
serve an  equity  of  more  or  less  doubtful  value  in  these  bankrupt  properties — and  all 
these  demands  have  already  been  met  or  are  being  met,  as  follows:  Reading, 
$28,000,000  j  Atchison,  $14,000,000 ;  Erie,  $10,000,000.  Here  is  a  total  of  $52,000,000  cash, 
paid  up  by  a  limited  number  of  people,  under  most  discouraging  conditions;  in  the 
case  of  the  Reading,  the  new  assessment  following  one  of  $15,000,000  levied  in  1889. 
We  leave  out  the  numerous  other  assessments  of  millions  levied  within  the  past  eight- 
een months  or  two  years — as  the  Richmond  Terminal,  of  $18,000,000."  Many  similar 
instances  could  bo  added. 

In  the  face  of  these  amounts  of  assessments,  raised  upon  the  stocks  of  roads  infe- 
rior, in  most  instances,  to  these  bond-aided  properties,  and  with  new  stock  merely, 
instead  of  good  bonds,  being  given  to  the  subscribers,  it  would  be  inefficient  on  the 
part  of  the  Government  not  to  direct  its  commissiorers  to  pursue  this  rightful  remedy, 

REORGANIZING  THE  ROADS  AS  AN  ENTIRETY— CONSOLIDATION. 

The  occasion  for  contemplating  consolidation  in  the  interest  of  the  Government 
arises  from  the  fact  that  there  is  an  excess  of  revenues  on  the  Union  Pacific  beyond 
the  amount  necessary  to  pay  the  Government,  while  on  the  Central  Pacific  there  is 
a  deficiency.  If  the  surplus  011  the  Union  and  Kansas  Pacific  (about  $900,000)  could 
be  utilized  as  the  basis  for  capitalizing  a  further  amount  of  four  and  a  half  bonds, 
twenty  millions  more  of  the  Central  Pacific  debt  could  be  paid  to  the  Government. 
This  could  be  effected  by  the  commissioners  providing  in  the  plan  for  the  sales  of 
both  roads  as  an  entirety.  They  could  provide  for  the  formation  of  a  single  corpora- 
tion to  own  both  roads.  This  company  should  issue  mortgage  bonds  predicated 
upon  the  earnings  of  both  lines  as  an  entirety.  There  would  then  be  $7,500,000  of 
annual  net  revenues,  ample  to  apply  to  the  interest  at  4£  per  cent  on  $165,000,000 
of  debt,  the  net  aggregate  of  the  first  and  Government  mortgages  on  the  three 
roads.  The  subscription  to  these  bonds  by  the  present  stockholders  and  junior 
bondholders  would  furnish  the  condition  for  their  avoidance  of  foreclosure  and 
obliteration.  Of  this  amount  the  commissioners  are,  by  the  act,  required  to  reserve 
$10,000,000  to  secure  the  independent  outlet  to  the  Pacific.  The  present  road  from 
San  Jose  to  the  Pacific  would  not  be  of  much  value  if  a  new  road  were  built;  so 
that  its  owners  would  probably  be  willing  to  make  a  proper  arrangement  for  its  use 
with  the  new  company.  But,  if  it  had  to  be  built,  the  Government  commissioners 


GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  255 

could  turo  over  to  the  new  company  $10,000,000  of  the  interest-bearing  bonds,  retain- 
ing an  additional  $10,000,000  (to  bear  interest  when  earned)  as  explained  in  our 
previous  statement. 

The  practical  question  would  be  the  distribution  of  the  stock  of  the  consolidated 
company,  as  between  the  present  stockholders  of  the  Union  and  Central.  As  the 
Union  Pacific  would  furnish  the  greater  proportion  of  revenues  to  the  consolidated 
company,  as  well  as  a  lesser  debt,  it  would  seem  that  its  stockholders  should  have  a 
proportionately  increased  amount  of  the  consolidated  stock.  This  could  be  reached 
by  an  arithmetical  calculation.  There  is  nothing  in  the  bill,  as  now  drafted,  which 
militates  against  consolidation.  But  as  it  would  be  so  valuable  to  the  Government, 
we  have  suggested  a  clause  to  cover  it,  in  the  list  of  amendments  appended. 

PREFERENCE  OF  PROCEEDINGS  ON  CALENDARS  OF  COURTS. 

This  would  insure  the  utmost  promptitude  in  the  disposition  of  this  matter,  so 
that  it  could  be  disposed  of  in  sixty  to  ninety  days  after  the  appointment  of  com- 
missioners, if  we  are  to  judge  by  the  celerity  with  which  stockholders  have  paid 
similar  assessments.  An  amendment  is  inserted  in  our  bill  to  cover  this  point. 

TEMPORARY  EMPLOYMENT   OF   THE  ACT  OF   1887. — NO   SYNDICATE   REQUIRED. 

The  mere  affirmance  of  the  act  of  1887  by  the  present  Congress  would  most  likely 
render  the  execution  of  its  provisions  unnecessary,  because  the  first-mortgage  bond- 
holders would  perceive  that  it  was  in  the  power  of  the  Commissioners  to  protect  the 
Government.  Moreover,  the  Government  plan  of  reorganization  would  be  accept- 
able to  the  first-mortgage  bondholders,  as  it  offers  them  better  terms  than  many  of 
them  have  already  indicated  a  willingness  to  accept.  In  any  event,  the  redemption 
of  the  first-mortgage  debt  accruing  in  1896  would  be  merely  temporary  until  this 
reorganization  was  completed,  when  the  new  substituted  bonds  could  be  sold.  The 
bill  enables  the  Commissioners  thus  to  protect  the  Government  reorganization,  either 
through  the  act  of  1887  or  by  advances  obtained  from  stockholders  who  had  sub- 
scribed to  the  plan. 

This  plan  is  bound  to  produce  the  best  attainable  price  for  the  first  and  second 
mortgages. 

It  must  be  apparent  that  the  coercive  method,  adapted  in  this  bill  from  the  pre- 
vailing system  of  railroad  reorganization,  is  certain  to  produce  the  best  possible 
price  for  the  prior  mortgages.  It  is  not  to  be  supposed,  in  the  nature  of  things,  that 
the  junior  interests  in  these  properties  are  coming  forward  voluntarily  to  offer  the 
firsts  and  the  Government  the  highest  price  of  which  the  property  is  susceptible 
for  their  interests.  As  there  are  just  about  enough  earnings  to  sustain  the  capital- 
ization for  bringing  the  firsts  and  the  Government  "  out  whole,"  it  is  not  surprising 
to  find  the  juniors  and  stocks  maneuvering  to  get  the  prior  mortgages  to  share  these 
present  earnings  with  them,  instead  of  their  awaiting  a  partial  resumption  of  the 
old  scale  of  revenues.  As  matter  of  fact,  they  will  derive  considerable  advantage 
from  the  reduction  in  the  rate  of  interest  upon  the  new  issues,  substituted  for  the 
present  6  per  cent.  And  with  the  income  bonds  (which  the  Commissioners  would 
likely  accord  them,  in  lieu  of  their  present  fixed-charge  securities,  and  in  addition 
to  the  new  superior  mortgages  which  they  would  receive  for  their  subscriptions), 
they  would  get  all  out  of  the  property  to  which  they  are  equitably  entitled.  In  any 
event,  the  Government,  through  its  Commissioners  (being  its  own  committee  of 
reorganization),  would  act  directly  upon  each  junior  bondholder  and  stockholder, 
endeavoring  to  protect  the  future  of  his  investment.  No  syndicate  could  interpose 
between  the  Government  and  the  just  payment  of  more  than  $100,000,000  into  its 
Treasury,  as  well  as  the  protection  of  its  prior  lienors,  the  first-mortgage  bond- 
holders. 

L.  J.  MORRISON,  Of  Counsel. 

AMENDMENTS  TO  BILL. 

Section  1,  second  line,  after  "President,"  insert  the  words:  "not  more  than  two 
of  whom  shall  be  of  the  same  political  party,  and  none  of  whom  shall  have  been  in 
any  manner  officially  connected  with  any  of  said  companies." 

Section  2,  at  the  end,  insert  the  following  words :  "All  suits  to  enforce  liens  on  the 
bond-aided  railroads  shall,  in  furtherance  of  this  act,  have  absolute  preference  at  all 
stages  on  the  calendars  and  on  hearings  in  the  Federal  courts,  and  the  time  for 
return  of  all  process  and  the  filing  of  all  pleadings  shall  be  shortened  so  that  the 
roads  may  be  sold,  under  this  Government  plan  of  reorganization,  not  later  than 
October  1,  1896." 

Section  3,  fourth  line,  before  the  word  "  company,"  insert  the  word  "consolidated." 
On  the  fourteenth  line  of  the  same  section,  after  the  word  "railroads,"  insert  the 
words,  "as  an  entirety." 


256  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Section  4,  eighth  liue,  after  the  word  " Government,"  insert:  "This  company  shall 
possess  all  the  corporate  powers  heretofore  granted  by  Congress  to  the  bondaided 
railroads,  and  also  such  powers  as  may  he  requisite  to  enable  it  to  carry  out  the 
purposes  of  this  act." 

TESTIMONY  OF  MR.  COLLIS  P.  HUNTINGTON— Continued. 

Senator  MORGAN.  You  have  had  this  book  with  you  (the  Beport  of 
the  United  States  Railroad.  Commission)  for  two  weeks? 

Mr.  HUNTING-TON.  Yes,  about  that  time. 

Senator  MORGAN.  Have  you  examined  it  carefully? 

Mr.  HUNTING-TON.  I  have  looked  over  it,  in  part,  carefully;  I  have 
been  sick;  I  have  not  been  out  of  my  house  six  hours  since  the  time  I 
have  left  here. 

Senator  MORGAN.  Have  you  found  any  points  on  which  you  wish  to 
raise  objections  to  the  report  .of  the  Commission? 

Mr.  HUNTING-TON.  I  object  to  the  report  as  a  whole.  It  is  a  report 
made  without  information. 

Senator  MORGAN.  Wherein  do  you  object  to  it  as  a  whole? 

Mr.  HUNTINGTON.  I  have  written  out  some  points  which  I  will  read 
to  the  committee. 

Senator  MORGAN.  I  will  read  it  for  you.  Before  reading  it,  I  will 
ask  you  whether  you  object  to  the  facts  stated,  or  to  the  conclusions  of 
the  committee? 

Mr.  HUNTINGTON.  I  object,  because  their  conclusions  are  somewhat 
contradictory  to  their  statements;  but  particularly  on  the  ground  that 
they  did  not  and  could  not  know  of  what  they  were  writing. 

Senator  MORGAN.  They  could  have  known  if  the  witnesses  who  were 
brought  before  them  told  the  truth. 

Mr.  HUNTINGTON.  Probably;  but  none  of  the  witnesses  who  came 
before  them  knew  what  the  facts  were. 

Senator  MORGAN.  Did  not  Mr.  Stanford? 

Mr.  HUNTINGTON.  Stanford  knew  very  little. 

Senator  MORGAN.  You  were  a  witness  before  the  Commission;  you 
had  a  full  opportunity  to  tell  all  you  knew? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  do  so? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Then,  of  course,  the  Commissioners  knew  what 
they  were  writing  about. 

Mr.  HUNTINGTON.  They  did  not  pay  much  attention  to  my  testimony. 

Senator  MORGAN.  You  do  not  think  that  they  discredited  your 
statement  ? 

Mr.  HUNTINGTON.  No ;  I  do  not  mean  that. 

The  following  is  the  paper  prepared  by  Mr.  Huntington  and  handed 
to  the  committee  as  his  reply  to  the  conclusions  arrived  at  by  the  United 
States  Pacific  Eailroad  Commission: 

1  observe  that  on  page  25  of  the  United  States  Eailroad  Commis- 
sioners' report  they  state  that  the  bonds  and  stocks  of  certain  leased 
lines  there  referred  to  are  chiefly  owned  by  the  individual  directors  in 
the  Southern  Pacific  Company. 

Now,  my  recollection  is  that  one  of  the  principal  leased  lines  at  the 
time  was  the  California  Pacific,  with  the  building  of  which  we  had  noth- 
ing to  do,  and,  as  I  remember,  we  never  had  any  of  the  bonds;  and, 
as  to  the  other  roads  that  we  did  build,  our  custom  was  to  carry  the 
bonds  until  the  roads  had  been  worked  long  enough  to  show  earnings 


GOVERNMENT  DEBT   OP  THE   PACIFIC   RAILROADS.  257 

sufficient  to  pay  interest  on  the  bonds,  after  which  they  were  sold  as 
soon  as  we  could  find  a  market  for  them,  and  the  debts  created  in  the 
construction  of  the  road,  which  meantime  had  been  carried  upon  our 
credit,  were  then  paid. 

I  observe  that  on  the  same  page  the  Commissioners  say  that  their 
review  of  the  history  of  the  affairs  of  the  Central  Pacific  Eailroad  Com- 
pany justifies  the  assertion  that  the  financial  condition  of  that  company 
has  been  caused  by  the  incessant  depletion  of  its  treasury  and  misap- 
propriation of  its  property  by  those  whose  sacred  duty  it  was  to  protect 
and  defend  the  company. 

While  I  would  say  that  they  probably  honestly  came  to  that  conclu- 
sion from  what  they  had  been  told  by  parties  in  San  Francisco,  yet  a 
greater  lie  was  never  printed,  for  there  never  was  any  depletion  of  the 
company's  treasury  or  misappropriation  of  its  property;  and  I  will  say 
again  that  no  work  was  ever  built  where  greater  economy  was  practiced 
or  more  care  taken  in  the  expenditure  of  money  than  in  the  building  of 
the  Central  Pacific,  and  when  completed  there  were  not  enough  of  the 
assets  controlled  by  the  builders  to  pay  the  debts  created  in  the  build- 
ing of  the  road,  and  if  the  securities  taken  for  such  building  had  not 
largely  appreciated  the  builders  of  the  road  would  have  been  bank- 
rupted by  the  debts  incurred  in  its  construction. 

I  observe  that  on  page  26  of  the  report  the  Commissioners  state  that 
the  financial  inability  of  the  company  to  meet  the  requirements  of  the 
readjustment  bill  prepared  by  the  Commissioners  was  the  result  of  the 
profligate  and  wanton  dispersion  of  the  assets  of  the  company  in  divi- 
dends and  the  extravagant  contracts  made  by  the  company. 

What  is  referred  to  as  extravagant  contracts  I  do  not  know,  as  I 
have  no  recollection  of  any  extravagant  contracts  made  after  the  build- 
ing of  the  road  of  any  great  importance,  and  they  were  always  made 
for  the  best  interest  of  the  Central  Pacific  Company. 

As  to  the  dividends,  we  carried  the  shares  until  they  began  to 
appreciate  and  then  we  commenced  selling,  and  the  prices  ranged  all 
the  way,  as  I  remember,  from  19  cents  up  to  85  cents.  These  dividends 
were  paid,  as  is  usually  the  case  and  as  the  stockholders  had  a  right  to 
claim  should  be  done,  out  of  the  earnings  of  the  property,  and  only  out 
of  such  earnings,  after  the  payment  of  the  fixed  charges  upon  the 
property  and  the  payments  of  the  amounts  which  the  Government  by 
the  acts  of  1862  and  1864  and  1878  provided  should  be  reserved  for 
repayment  of  the  amount  of  the  Government  aid.  As  I  have  already 
stated,  we  sold  our  shares  in  order  to  enable  us  to  pay  the  debts  incurred 
in  the  construction  of  the  road  as  soon  as  the  shares  could  be  sold  at 
prices  sufficient  to  do  this,  and  the  stock  was  therefore  widely  distrib- 
uted while  the  dividends  were  being  paid. 

I  observe  that  on  page  50  the  Commissioners  state  that  they  have 
reached  the  conclusion  that,  with  the  single  exception  of  the  then 
existing  administration  of  the  Union  Pacific,  all  the  duties  and  obliga- 
tions referred  to  as  assumed  by  the  managers  of  the  roads  had  been 
constantly  and  persistently  disregarded,  and  that  the  result  was  that 
those  who  had  controlled  and  directed  the  construction  and  develop- 
ment of  the  companies  had  become  possessed  of  their  surplus  assets 
through  issues  of  bonds  and  stocks  and  payments  of  dividends  voted 
by  themselves,  while  the  great  creditor,  the  United  States,  finds 
itself  substantially  without  adequate  security  for  the  repayment  of  its 
loans. 

In  reply  to  this  I  would  say  that  the  United  States  expressly  pro- 
vided, in  1862  and  1864,  and  again  in  1878,  what  security  should  be 

P  R 17 


258  GOVERNMENT  DEBT   OF   THE   PACIFIC   RAILROADS. 

reserved  for  the  repayment  of  its  loans,  and  every  dollar  of  this  secu- 
rity was  reserved  in  accordance  with  the  provisions  of  these  acts.  We 
have  never  heard  that  the  Union  Pacific  administration,  which  the 
Commission  refer  to  as  a  single  exception,  ever  reserved  a  dollar  more 
as  security  for  the  repayment  of  its  loans  than  was  required  to  be 
observed  by  these  acts,  which  we  have  fully  complied  with. 

But  time  has  shown  how  wrong  the  Commissioners  were  in  their  esti- 
mate of  the  results  of  the  Union  Pacific  administration,  which  they 
took  so  much  pains  to  extol,  as  compared  with  the  administration  of 
the  Central  Pacific  properties.  Time  has  shown  that  although  the  Cen- 
tral Pacific  properties  were  subject  to  a  larger  amount  of  fixed  charges  on 
account  of  the  greater  physical  obstructions  which  had  to  be  overcome 
in  constructing  the  road,  and  although  the  properties  were  operated  at 
a  great  disadvantage,  all  material  being  higher  and  coal  used  in  Cali- 
fornia being,  say,  four  times  as  expensive  as  that  used  by  the  Union 
Pacific,  the  administration  of  the  Central  Pacific  has  paid  all  its  debts 
and  obligations  currently,  while  the  Union  Pacific  has  defaulted  even 
on  the  interest  on  her  first-mortgage  bonds. 

As  to  the  statements  of  the  Commission  in  reference  to  the  construc- 
tion contracts  and  the  books  of  the  Contract  and  Finance  Company  and 
what  became  of  them  I  have  already  testified  fully  upon  my  previous 
examination,  and  therefore  I  have  not  undertaken  to  correct  the  state- 
ments of  the  Commission  in  reference  to  these  subjects.  There  are  many 
erroneous  statements. 

I  will  say,  however,  that  there  were  no  unfair  contracts  made,  and 
those  that  were  made  were  so  liberal  to  the  railroad  company  that — I 
will  state  here  as  I  have  often  said — we  could  get  cocapitalists  either  in 
San  Francisco  or  in  New  York  or  in  Boston  to  share  the  risks  with  the 
builders. 

I  observe  that  the  Commission  refer  to  the  suits  which  were  brought 
in  California  by  Sam  Brannan  and  others  as  stockholders  of  the  Cen- 
tral Pacific  Railroad  Company. 

I  have  already  stated  that  suits  of  a  similar  character  were  brought 
here  in  New  York,  where  they  were  ander  my  direct  observation.  The 
suits  were  defended  in  all  the  courts,  and  we  were  absolutely  and 
entirely  successful,  and  the  plaintiffs  were  entirely  defeated  by  deci- 
sions of  the  highest  courts  of  the  State  of  New  York.  As  to  the 
suits  commenced  in  California,  I  can  only  say  that  if  they  had  been 
under  my  supervision  I  would  have  fought  them  in  the  same  way  and 
with  the  same  results;  but  the  suits  were  commenced  for  blackmail 
and  settled  by  others  than  myself,  and  for  political  reasons  about  which 
I  knew  and  cared  nothing,  and  when  I  heard  of  it  I  disapproved  the 
settlement. 

I  have  already  stated  what  an  absolutely  wild  and  reckless  estimate 
of  the  road  is  contained  in  the  report  of  the  Commission  on  pages  74 
and  75,  where  it  is  stated  as  amounting  to  $36,000,000.  They  are  mis- 
taken in  that.  They  did  not  know  and  could  not  know  anything 
about  the  cost  of  constructing  the  road,  while  I  knew  all  about  it. 
While  I  could  not  tell  to-day  just  what  it  cost,  my  impression  is,  I 
might  say  I  believe,  that  it  cost  much  more  than  twice  the  amount 
named. 

Referring  to  the  statement  of  the  Commissioners,  page  75,  that  Mr. 
Stanford  admitted  that  fifty-four  millions  of  stock  held  by  the  Contract 
and  Finance  Company  were  substantially  a  net  profit,  subject  only  to 
the  liquidation  of  the  indebtedness  of  the  Contract  and  Finance  Com- 
pany, not  exceeding  $3,000,000,  I  would  say  that  Mr.  Stanford  was 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  259 

mistaken ;  that  while  I  do  not  know  just  the  amount  of  the  indebted- 
ness of  the  Contract  and  Finance  Company  after  the  completion  of  the 
railroad,  I  am  satisfied  it  is  more  than  three  times  three  millions,  and 
I  do  not  know  how  much  stock  they  did  have,  as  I  have  already  testi- 
fied, I  think;  that  I  do  not  know  just  how  much  Charles  Crocker  did 
under  his  contract,  but  I  have  a  recollection  that  his  contract  was 
turned  over  to  the  Contract  and  Finance  Company  on  account  of  his 
inability  to  meet  the  requirements  of  the  contract.  I  do  know  that  the 
amount  of  indebtedness  remaining  unpaid  when  the  road  was  com- 
pleted could  not  have  been  paid  out  of  the  balance  of  the  assets  that 
the  Contract  and  Finance  Company  held  at  that  time.  The  fact  is 
that  Governor  Stanford  never  knew  very  much  about  what  the  com- 
pany had  or  what  it  was  doing.  He  was  always  largely  in  politics  and 
not  much  in  railroading. 

As  an  illustration  of  the  methods  adopted  by  the  Commission  in  ascer- 
taining the  cost  of  work,  I  would  refer  to  the  report  at  the  foot  of  page 
75,  where  they  substituted  a  wholly  unfounded  assumption  of  their  own 
for  the  testimony  of  Gen.  G.  M.  Dodge,  a  well-known  and  experienced 
engineer  of  undoubted  ability  and  integrity,  as  to  the  actual  cost  of  con- 
struction of  the  47£  miles  of  the  road  from  Promontory  to  Bonneyille 
Table.  General  Dodge  testified  that  the  cost  of  this  piece  of  road  was 
$87,000  cash  per  mile,  which  would  equal  $4,132,500,  notwithstanding 
which  fact  the  Commissioners,  for  their  own  purposes  and  without  evi- 
dence, see  fit  to  estimate  its  cost  at  $3,000,000.  I  have  no  doubt  that 
General  Dodge's  statement  was  right:  and  it  should  be  understood 
that  there  were  no  important  structures  on  the  47J  miles,  and  that  no 
rolling  stock  went  with  it. 

Another  illustration  of  the  recklessness  (or  worse)  of  the  draftsman  of 
the  Pacific  Railway  Commission's  report  is  near  the  foot  of  page  73, 
where  reference  is  made  to  my  testimony,  given  before  the  Wilson  com- 
mittee in  February,  1873,  which  was  more  than  a  year,  I  think,  before 
the  winding  up  of  the  Contract  and  Finance  Company.  The  draftsman 
of  this  report  impugns  this  statement,  which  I  made  in  February,  1873, 
and  which  was  a  true  one,  by  reference  to  the  testimony  of  Governor 
Stanford  before  the  Pacific  Railroad  Commission,  which  related  to  a 
period  long  subsequent  to  the  time  when  I  gave  my  testimony  before 
the  Wilson  committee,  but  did  not  in  the  slightest  degree  contradict  the 
testimony  which  I  gave,  for,  as  I  have  said,  it  related  to  a  period  long 
subsequent  to  the  time  I  was  testifying  to  and  long  subsequent  to  the 
time  when  my  testimony  was  given ;  and  more  than  all  this,  as  I  have 
already  stated,  I  think  Governor  Stanford's  statement  was  an  erroneous 
one  with  reference  to  any  point  of  time. 

I  do  not  know  what  it  refers  to,  as  I  am  quite  sure  there  was  no  such 
amount  of  stock;  but  he  probably  referred  to  the  stock  that  belonged 
to  the  Contract  and  Finance  Company.  Yet  in  that  he  certainly  was 
mistaken,  as  no  such  amount  of  shares,  if  any,  came  to  the  builders  of 
the  road  after  the  liquidations  of  the  debts  of  the  company,  although 
there  was  some  money  distributed  after  the  shares  were  sold  and  the 
debts  were  paid. 

As  to  the  building  of  the  Western  Pacific,  certain  portions  of  it  were 
not  very  expensive  to  build;  although  the  work  where  they  crossed 
the  Mount  Diablo  range  was  expensive,  and  also  that  through  the 
Alameda  Canyon,  and  the  bridging  was  quite  expensive.  We  had  to 
cross  between  Sacramento  and  Tracy,  and  the  San  Joaquin  River,  the 
Tuolumne,  the  Stanislaus,  the  McKosiney,  and  the  Calaveras,  I  think. 
I  think  there  were  three  quite  important  bridges  over  the  Alameda 


2 GO  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Eiver,  in  passing  through  the  canyons  by  that  name,  but  I  do  not 
exactly  remember  how  much  of  that  we  built.  The  parties  who  located 
and  owned  the  road  and  commenced  its  construction  did  considerable 
work,  and,  I  think,  built  from  San  Jose  into  the  canyons  of  the  Alameda 
and  then,  as  I  remember,  they  found  that  all  the  resources  of  the  road 
— bonds  and  stock — were  not  sufficient  to  enable  them  to  complete  the 
work.  They  gave  it  up  and  arranged  with  our  people  to  complete  the 
road,  which  we  were  able  to  do  by  our  superior  credit,  which  did  not 
compel  us  to  sell  our  securities  until  after  the  completion  of  the  road, 
which  then  showed  some  earning  power,  which  added  to  the  value  of 
the  securities.  Of  course,  the  difficulties  in  the  way  of  its  construction 
would  not  naturally  have  been  noticed  by  the  commissioners,  who  rode 
over  it  probably  in  a  palace  car,  and  possibly  did  not  wish  to  see  any 
of  the  great  physical  difficulties  which  the  builders  had  to  overcome. 

As  to  the  construction  of  the  portion  of  the  California  and  Oregon 
road,  say,  103  miles,  from  Delta  to  the  Oregon  State  line,  I  would  say,  as 
I  remember  it,  that  $80,000  a  mile  is  as  little  as  I  think  any  conservative 
parties  able  to  do  the  work  would  contract  to  do  it  for.  Delta  is  at  the 
foot  of  the  Sacramento  Canyon,  and  from  there  to  the  summit  or  top  oi 
the  mountain  at  the  divide  between  the  Sacramento  and  Shasta  rivers 
it  was  very  expensive  construction,  and  the  bridges,  as  I  remember, 
were  all  of  iron,  resting  on  stone  masonry.  It  was  very  solid,  conse- 
quently very  expensive.  I  think  the  constructed  line  rises  to  a  height 
of  nearly  5,000  feet  above  the  level  of  the  sea,  and  the  road  is  all 
expensive;  although  down  Shasta  Eiver  it  is  not  of  so  ugly  a  charac- 
ter as  climbing  from  Delta  up  to  the  summit.  Then  we  have  to  cross 
the  Klamath  Eiver,  which  is  a  very  expensive  bridge,  and  get  over  Bay- 
lis  Mountain  to  the  Oregon  State  line  at  Coles,  in  the  foothills  of  the 
Siskiyou  Mountains. 

So  it  seems  to  me  that  it  was  a  conservative  contract  to  have  agreed 
to  build  that  road  for  four  and  a  half  millions  of  bonds  and  80,000 
shares  of  the  Central  Pacific,  and  particularly  so  when  at  the  same 
time  the  Pacific  Improvement  Company  agreed  to  acquire  the  control 
and  secure  the  completion  of  the  Oregon  and  California,  the  acquisition 
of  which  was  very  essential  to  the  Central  Pacific,  as  the  California 
and  Oregon  would  have  been  of  little  value  between  Delta  and  the 
State  line  without  connecting  therewith  another  and  a  friendly  road  to 
take  business  to  and  bring  it  from  Portland,  Oreg.,  on  the  Columbia 
Elver,  where  it  would  connect  with  the  great  railroad  systems  of  Oregon 
and  Washington.  This  is  particularly  true  when  we  consider  the 
expensive  character  of  the  work  on  the  Oregon  and  California  between 
Eoseburg  and  the  State  line  at  Coles.  The  magnitude  of  that  work 
was  the  main  cause  of  breaking  Ben.  Holliday  and  his  associates  in  the 
early  days,  and  the  Oregon  Transcontinental  and  the  associated  Vil- 
lard  interests  at  a  later  date.  The  Pacific  Improvement  Company  had 
to  assume  the  heaviest  of  all  the  work  from  Ashland,  on  Bear  Creek, 
across  the  Siskiyou  Mountains,  to  Coles,  on  the  State  line. 

It  would  be  useless  to  undertake  to  discuss  the  tables  which  were 
stated  to  have  been  prepared  by  the  accountant  of  the  commission  in 
reference  to  the  cost  of  construction,  and  the  consideration  received  in 
bonds  or  stock  or  cash  for  such  construction.  I  have  already  shown 
by  my  statements  how  utterly  unfounded  are  the  assumptions  of  this 
report  in  respect  to  the  actual  cash  cost  of  the  construction  of  the 
various  properties.  It  is  impossible  for  anyone  to  carry  in  his  head 
the  cost  of  railroad  materials  from  a  railroad  spike  up  to  a  locomotive 
and  the  varied  classifications  in  the  construction  of  a  road,  as  there  aie 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  261 

so  many  articles  connected  with  the  building  of  a  railroad  that  it  is  not 
a  possible  thing  for  any  man  to  retain  in  his  memory  any  considerable 
percentage  of  them.  I  have  always  been  satisfied  that  few  men  would 
have  built  the  roads  we  built  out  of  the  assets  which  we  had  to  build 
them  with,  which  has  been  a  great  gratification  to  me. 

As  to  the  express  business  on  the  Central  Pacific  Eailroad  I  would 
say  that  about  the  time  the  road  was  completed  an  express  company 
was  formed  in  the  usual  way,  and  I  think  Governor  Stanford,  Lloyd 
Tevis,  Mr.  Crocker,  and  myself  started  in  to  provide  the  means  for 
procuring  the  facilities  necessary  to  carry  on  that  business.  Of  course 
this  required  a  very  considerable  and  expensive  equipment  outside  of 
the  railroad  and  its  equipment  and  facilities.  Afterwards  the  Wells, 
Fargo  &  Co.'s  express  proposed  to  consolidate  or  in  some  way  join  inter- 
ests with  us,  and  that  was  done,  though  exactly  in  what  form  I  do  not 
remember.  I  do  remember  having  some  of  the  shares,  though  just  how 
many  I  could  not  say,  and  I  sold  them,  as  I  did  nearly  everything  that 
I  could  realize  money  on,  and  used  the  money  to  pay  my  debts. 

As  to  the  Rocky  Mountain  Coal  Company,  whose  properties  were  at 
Almy,  on  the  Union  Pacific  Eailroad,  some  people  in  California  bought 
it.  I  do  not  know  who  they  were  at  this  time,  but  I  am  quite  sure 
none  of  the  Central  Pacific  people  had  anything  to  do  with  it  for  some 
time  after  it  was  organized ;  but  later  it  was  offered  to  some  of  them 
and  a  portion  of  the  shares  were  bought.  I  had  some  of  them  myself— 
I  do  not  know  how  many — and  they  paid  dividends  for  some  time;  but 
I  think  in  every  case  the  coal  company  sold  coal  to  the  Central  Pacific 
Eailroad  Company  at  less  than  it  could  have  bought  from  any  other 
parties,  and  the  existence  of  that  company  and  its  operations  constantly 
tended  to  diminish  the  price  at  which  the  Central  Pacific  could  pur- 
chase coal  for  use  on  its  line;  and  just  as  soon  as  the  Central  Pacific 
could  get  coal  cheaper  than  we  could  from  the  Almy  property  we  did 
so,  and  have  bought  coal  largely  from  the  Eio  Grande  Western.  The 
transaction  was  a  proper  and  clean  one,  and  there  was  nothing  unusual 
about  it. 

There  is  a  great  deal  said  in  the  report  about  frauds  and  wrongdoing, 
and  charging  the  builders  of  the  road  with  doing  almost  everything 
that  was  wrong;  in  fact,  much  of  the  stuff  published  is  a  rehash  of  old 
musty  things,  and  is  more  like  a  talk  among  vicious  men  not  quite 
sober  than  the  report  of  a  Government  commission.  I  have  known 
from  the  beginning  nearly  all  that  has  been  done  in  the  building  of  the 
road.  I  have  known  of  the  work  we  had  to  do  and  what  we  had  to  pay 
for  it,  and  no  better  work  was  ever  done  than  has  been  done  in  the  build- 
ing of  these  roads ;  and  when  I  say  this  I  say  that  the  interest  of  the 
Government  has  been  better  cared  for  in  this  work  than  in  any  other 
outside  work.  Of  course  I  do  not  refer  to  Government  work,  as  that 
I  do  not  know  anything  about. 

As  to  the  charge  of  using  money  to  influence  legislation,  I  will  say 
that  no  money  was  ever  used  by  me  or  by  anyone  connected  with  our 
companies,  to  my  knowledge,  for  the  purpose  of  influencing  legislation, 
except  that  from  time  to  time  different  persons  have  been  employed  in 
the  various  States  and  Territories  and  at  Washington  to  see  that  the 
facts  in  respect  to  pending  legislative  matters  were  thoroughly  and  fully 
understood  by  the  legislators  who  had  to  pass  upon  them. 

The  Commission  again  refers,  on  pages  87  and  88,  to  the  dividends 
which  were  paid  to  the  stockholders  out  of  the  earnings  of  the  Central 
Pacific  Eailroad  Company.  The  Commission  admitted  that  these  divi- 
dends were  paid  out  of  the  earnings,  as  shown  by  the  income  account 


262  GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS. 

of  the  company,  and  did  not  involve  any  violation  of  law ;  and  it  would 
seein  to  follow  from  their  statements  in  reference  to  the  matter  that 
the  stockholders  were  legally  and  justly  entitled  to  receive  from  the 
company  all  the  dividends  which  were  ever  paid;  but  the  fact  was,  as 
1  have  already  stated,  that  the  United  States  prescribed,  in  18C2  and 
1864,  and  afterwards,  in  1878,  just  what  reservation  should  be  made 
from  its  earnings  for  the  protection  of  the  Government  debt,  and  we 
conformed  in  all  respects  to  the  requirements  of  those  laws  in  reference 
to  that  matter.  Just  before  the  passage  of  the  Thurman  Act  we  had 
made  arrangements  for  creating  a  sinking  fund,  by  way  of  preparation 
for  the  maturity  of  the  Government  debt,  and  if  the  matter  had  been 
left  to  us  to  handle  a  sinking  fund  would  have  been  created  and  would 
have  been  kept  so  invested  as  to  pay  off  a  sufficient  amount  of  the 
Government  debt  to  bring  that  indebtedness  within  safe  limits;  but 
the  Government  took  the  matter  out  of  our  hands  and  passed  the 
Thurman  Act  and  prescribed  itself  the  provision  which  should  be  made 
against  the  maturity  of  the  Government  debt,  and  we  were  obliged  to 
accede  to  the  provisions  of  this  act,  and  have  strictly  obeyed  it.  The 
question  of  what  provision  should  be  made  against  the  maturity  of  this 
debt  was  not  left  by  the  Government  for  us  to  determine,  but  was  taken 
out  of  our  hands  and  determined  by  the  Government  itself. 

I  do  not  care  to  enter  into  a  discussion  about  equities,  which  appears 
on  pages  91  to  95  of  the  Commissioners'  report.  Although  I  do  not 
see  any  reason  why,  still  they  seem  to  vex  the  Commissioners  very  much. 
I  would  hardly  expect  the  Government  officers  to  make  any  money  allow- 
ances for  them  in  a  settlement,  although  the  great  grants  given  to  the 
roads  north  and  south  of  the  Central  Pacific,  which  were  not  expected 
by  the  Government  or  anyone  else  to  be  completed  as  soon  as  they 
were,  destroyed  largely  the  net  earnings  of  the  Central  line ;  and  in  the 
seven  and  more  years  in  which  the  road  was  completed  before  the  time 
required  the  Government  probably  saved  more  than  it  had  advanced 
in  bonds  to  the  Union  and  Central.  And  these  might  be  reasons  why 
the  Government  should  be  a  little  more  lenient  in  settling  with  these 
roads,  or  consider  a  bill  which  would  pay  all  of  the  indebtedness  in  an 
average  of,  say,  fifty  years,  with  as  much  interest  paid  currently  as 
could  be  taken  from  the  earnings  for  that  purpose,  as  such  a  settlement 
would  be  much  better  for  the  Government  than  if  the  roads  had  not  been 
built. 

Senator  MORGAN.  Accepting  your  statement  as  true,  and  you  having 
had  an  opportunity  under  oath  of  giving  your  deposition  before  the 
commission,  why  has  not  the  commission  been  able  to  get  the  facts  on 
which  it  based  its  conclusions? 

Mr.  HUNTINGTON.  I  do  not  know.  They  did  not  know  anything 
about  the  matter,  except  from  what  they  heard,  and  they  heard  mostly 
from  persons  who  did  not  know  anything.  I  was  in  correspondence  with 
people  who  were  there  and  I  knew  all  about  things  generally.  I  was 
in  the  building  of  the  Central  Pacific  road  from  start  to  finish;  I  do 
not  want  to  go  back  and  change  any  record  which  I  made. 

Senator  MORGAN.  The  question  is  not  so  much  about  your  building 
the  road  as  about  what  you  made  out  of  it. 

Mr.  HUNTINGTON.  We  did  not  make  any  more  than  we  had  a  right 
to  make. 

Senator  MORGAN.  I  suppose  you  had  the  right  to  make  all  that  you 
could? 

Mr.  HUNTINGTON.  All  that  we  did  make;  certainly. 

Senator  MORGAN.  Why  is  it  that  you  persist  in  saying  that  this 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  263 

commission  did  not  know  what  it  was  doing,  when  you  had  the  oppor- 
tunity, and  Stanford  had  the  opportunity,  and  numerous  other  wit- 
nesses who  did  know  about  the  transaction  had  the  opportunity,  to 
inform  the  commission,  under  oath,  of  the  facts  on  which  the  commis- 
sion was  required  to  act  as  a  judicial  investigating  body! 

Mr.  HUNTINGTON.  The  commission  arrived  at  conclusions  which  I 
could  not  arrive  at  by  the  testimony  as  I  read  it. 

Senator  MORGAN.  I  suppose  that  you  could  not  arrive  at  conclusions 
otherwise  than  very  friendly  to  yourself? 

Mr.  HUNTINGTON.  I  can  divide  a  thing  exactly  in  the  center.  If  I 
owned  half  of  a  thing  and  somebody  else  owned  the  other  half  I  could 
divide  it  exactly,  and  if  the  knife  swerved  it  would  be  on  my  half  and 
not  on  the  other  man's  half. 

Senator  MORGAN.  As  between  you  and  the  people,  can  you  make 
that  sort  of  division  ? 

Mr.  HUNTINGTON.  I  can. 

Senator  MORGAN.  I  am  going  to  give  you  a  chance  to  do  it. 

Mr.  HUNTINGTON.  I  want  you,  Senator,  to  know  all  that  I  know. 

Senator  MORGAN  (reading  from  Mr.  Huntington's  memoranda)  : 

I  observe  that  on  page  25  of  the  United  States  Railroad  Commissioners'  Report 
they  state  that  the*  bonds  and  stocks  of  certain  leased  lines  there  referred  to  are 
chiefly  owned  by  the  individual  directors  of  the  Southern  Pacific  Company.  Now, 
my  recollection  is  that  one  of  the  principal  leased  lines  at  the  time  was  the  California 
Pacific,  with  the  building  of  which  we  had  nothing  to  do. 

Is  that  the  only  one  that  you  except  from  the  findings  of  the  com- 
mission ? 

Mr.  HUNTINGTON.  That  is  the  only  one  which  we  had  not  anything 
to  do  with  the  building  of. 

Senator  MORGAN.  Is  that  the  only  one  which  you  wish  to  except  from 
the  findings  of  the  commission? 

Mr.  HUNTINGTON.  I  should  except  to  everything  the  commission  has 
written  which  is  not  correct. 

Senator  MORGAN.  Have  the  commissioners  made  any  incorrect  state- 
ment about  other  roads  than  the  California  Pacific? 

Mr.  HUNTINGTON.  I  think  they  have. 

Senator  MORGAN.  What  others? 

Mr.  HUNTINGTON.  I  should  have  to  go  and  read  their  report  over 
again.  When  I  read  a  thing  and  come  to  conclusions  I  put  them  down 
and  can  not  carry  them  in  my  head. 

Senator  MORGAN.  You  can  read  the  report  of  the  commission  if  you 
want  to. 

Mr.  HUNTINGTON.  I  should  say,  in  general  words,  that  their  report  is 
wrong. 

Senator  MORGAN.  But  you  do  not  undertake,  in  a  general  way,  or  in 
a  special  way,  to  state  from  your  own  memory,  or  otherwise,  in  what 
respect  the  facts  are  wrong  on  which  the  commissioners  adjudicated? 

Mr.  HUNTINGTON.  I  know  this,  that  the  Contract  and  Finance  Com- 
pany took  a  certain  amount  of  stock  and  bonds  of  the  Central  Pacific 
(or  of  stock  and  money)  to  build  the  road;  that  the  trade  which  we 
made  was  a  fair  one;  that  the  road  was  built,  and  that  when  we  found 
a  way  to  sell  our  stock  and  pay  our  debts  we  did  so. 

Senator  MORGAN.  You  say  that  it  was  a  fair  trade? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  You  made  both  sides  of  the  trade? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Who  did! 


264  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  If  we  had  all  the  stock  and  all  the  bonds,  I  do  not 
know  who  there  was  to  complain.  I  am  assuming  that  we  did  have 
them.  If  we  did,  we  owned  the  two  sides,  and  we  dealt  with  ourselves. 
I  think  there  was  some  other  interest  outside  of  us. 

Senator  MORGAN.  That  is  to  say,  that  it  was  the  Southern  Pacific  and 
the  Western  Development  Company  making  a  trade  together,  the 
Southern  Pacific  and  the  Western  Development  Company  being  in  the 
ownership  and  control  of  exactly  the  same  people? 

Mr.  HUNTINGTON.  No  5  not  the  same.  I  do  not  think  that  I  was  in 
the  Southern  Pacific  a  part  of  the  time. 

Senator  MORGAN.  Were  you  in  it  at  the  time  you  made  this  contract? 

Mr.  HUNTINGTON.  I  do  not  think  I  was;  but  I  may  have  been.  We 
substantially  had  both  sides.  We  could  not  get  anybody  in  with  us.  I 
tried  for  years  to  get  somebody  to  come  in. 

Senator  MORGAN.  That  is  rather  an  important  point,  you  know  ? 

Mr.  HUNTINGTON.  It  is  important  with  me. 

Senator  MORGAN.  It  is  important  to  the  country,  too.  I  want  to  know, 
and  I  want  you  to  state  as  distinctly  as  you  can  recollect,  what  part  of 
the  time  you  were  out  of  the  Southern  Pacific  Company  from  the  begin- 
ning of  its  existence  to  the  present  time? 

Mr.  HUNTINGTON.  I  do  not  recollect. 

Senator  MORGAN.  How  much  of  the  time  were  you  out? 

Mr.  HUNTINGTON.  I  do  not  recollect.  I  may  have  been  out  part  of 
the  time,  but  I  do  not  recollect. 

Senator  MORGAN.  Were  you  out  of  it  for  a  year? 

Mr.  HUNTINGTON.  I  may  have  been  out  for  a  year;  it  may  have  been 
less  or  it  in  ay  have  been  more. 

Senator  MORGAN.  Were  you  out  for  six  months! 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  One  month? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  One  day? 

Mr.  HUNTINGTON.  I  think  I  was  out  of  it  many  days.  If  I  have 
got  to  go  and  look  up  my  life's  history  in  detail  from  day  to  day  for 
the  last  sixty  years,  I  have  not  time  to  do  it. 

Senator  MORGAN.  I  do  not  propose  to  touch  any  part  of  your  life's 
history  except  that  which  is  wrapped  up  in  these  railroads,  and  that 
part  of  it,  of  course,  I  want  to  find  out. 

Mr.  HUNTINGTON.  If  you  tell  me  what  you  want  to  know  particu- 
larly, or  tell  me  of  anything  which  we  have  wrongfully  taken,  I  will 
try  and  explain  it  to  you.  I  have  not  wrongfully  taken  anything.  If 
you  want  to  find  out  any  particular  thing  I  will  look  it  up,  but  I  can 
not  go  back  for  sixty  years. 

Senator  MORGAN.  I  want  to  find  out  those  things  which  you  have 
wrongfully  taken,  and  to  find  out  those  things  which  you  have  right- 
fully taken. 

Mr.  HUNTINGTON.  All  that  I  have  taken  was  rightfully  taken,  and 
nothing  was  wrongfully  taken. 

Senator  MORGAN.  You  have  taken  all  that  you  could  get. 

Mr.  HUNTINGTON.  All  that  we  could  get  under  the  contract;  and  the 
contract  was  a  fair  one. 

Senator  MORGAN.  You  do  not  know  whether  you  were  in  the  com- 
pany or  not  when  that  contract  was  made  for  the  construction  of  the 
Southern  Pacific  road  by  the  Western  Development  Company  I 

Mr.  HUNTINGTON.  I  do  not. 


GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  265 

Senator  MORGAN.  Did  you  not  arrange  that  contract? 

Mr.  HUNTINGTON.  No,  I  do  not  think  I  arranged  itj  probably  I  had 
something  to  do  with  it. 

Senator  MORGAN.  Do  you  not  know  that  you  did? 

Mr.  HTJNTINGTON.  No,  I  do  not  know  that  1  did. 

Senator  MORGAN.  Do  you  know  that  you  did  not? 

Mr.  HUNTINGDON.  No,  I  do  not  know.  We  were  doing  a  great  many 
things,  and  we  did  what  we  knew  was  right. 

Senator  MORGAN.  There  is  no  use  in  your  using  the  whitewash  brush 
any  longer. 

Mr.  HUNTINGTON.  I  am  not  using  a  whitewash  brush.  There  is 
nothing  about  what  we  did  that  needs  whitewashing. 

Senator  MORGAN.  Did  the  Western  Development  Company  take  a 
contract  and  build  the  Southern  Pacific  road? 

Mr.  HUNTINGTON.  Yes,  as  I  recollect  it. 

Senator  MORGAN.  Between  what  points! 

Mr.  HUNTINGTON.  I  can  not  say. 

Senator  MORGAN.  Commencing  where? 

Mr.  HUNTINGTON.  That  I  can  not  say.  We  bought  the  road  from 
San  Francisco  to  Gilroy,  80  miles,  and  I  think  we  commenced  building 
there. 

Senator  MORGAN.  You  commenced  to  naild  from  Gilroyt 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  You  did  mf*  leave  a  gap? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Where  was  the  other  end  of  the  road  which  the 
Western  Development  Company  agreed  to  build? 

Mr.  HUNTINGTON.  I  do  not,  for  the  moment,  remember. 

Senator  MORGAN.  How  far  from  Gilroy  was  it? 

Mr.  HUNTINGTON.  The  road  was  built  to  Yuma. 

Senator  MORGAN.  How  far  was  that? 

Mr.  HUNTINGTON.  Somewhere  about  600  miles. 

Senator  MORGAN.  Was  it  built  under  that  contract  with  the  Western 
Development  Company? 

Mr.  HUNTINGTON.  I  do  not  think  that  all  of  it  was. 

Senator  MORGAN.  How  much  of  it  was? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  About  how  much  ? 

Mr.  HUNTINGTON.  I  can  not  say. 

Senator  MORGAN.  You  have  no  opinion,  no  recollection  f 

Mr.  HUNTINGTON.  No,  I  have  not;  it  was  in  an  open  country,  where 
there  were  few  settlers,  and  where  there  were  no  towns  most  of  the  way. 

Senator  MORGAN.  How  far  was  the  Southern  Pacific  built? 

Mr.  HUNTINGTON.  It  was  built  to  Yuma  and  the  Needles ;  it  stopped 
there. 

Senator  MORGAN.  Did  any  other  company  agree  to  build  any  part  of 
this  railroad  between  Gilroy  and  Yuma? 

Mr.  HUNTINGTON.  My  impression  is  that  the  Pacific  Improvement 
Company  did. 

Senator  MORGAN.  Who  owned  that  company? 

Mr.  HUNTINGTON.  Substantially  the  same  interests. 

Senator  MORGAN.  So  that  it  was  a  matter  of  indifference  to  the  gen- 
tlemen owning  both  the  companies  whether  the  railroad  should  be  built 
by  the  one  or  the  other,  as,  whatever  profit  or  loss  accrued,  it  fell  on  the 
same  men? 


2G6  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  have  answered  that  question.  So  far  as  the 
same  men  were  in  the  two  companies  (and  I  think  they  were  all  in 
them)  it  would  not  make  any  difference. 

Senator  MORGAN.  Nobody  came  into  these  companies  besides  you 
four  men — Crocker,  Hopkins,  Stanford,  and  yourself? 

Mr.  HUNTINGTON.  Mr.  Colton  was  in  part  of  the  time. 

Senator  MORGAN.  What  percentage  of  interest  did  Mr.  Col  ton  have1? 

Mr.  HUNTINGTON.  I  do  not  know;  somewhere  in  the  neighborhood 
of  one  sixth. 

Senator  MORGAN.  What  did  he  do  with  his  interest? 

Mr.  HUNTINGTON.  I  do  not  know;  he  died. 

Senator  MORGAN.  He  did  not  lose  it  because  he  diedj  what  has 
become  of  it? 

Mr.  HUNTINGTON.  It  was  settled  up  by  his  widow. 

Senator  MORGAN.  Who  got  it? 

Mr.  HUNTINGTON.  His  widow  got  it. 

Senator  MORGAN.  To  whom  did  she  sell  it? 

Mr.  HUNTINGTON.  I  was  not  her  adviser  in  the  matter. 

Senator  MORGAN.  But  still  you  know? 

Mr.  HUNTINGTON.  I  do  not. 

Senator  MORGAN.  You  do  not  know  to  whom  she  sold  it? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Have  you  no  belief  or  information  as  to  whom  she 
sold  it? 

Mr.  HUNTINGTON.  No;  she  had  some  bonds,  but  what  she  did  with 
them  I  do  not  know. 

Senator  MORGAN.  She  may  have  all  that  interest  now? 

Mr.  HUNTINGTON.  I  do  not  know;  I  hardly  think  she  has  got  it;  she 
was  in  litigation  a  good  deal. 

Senator  MORGAN.  Did  you  buy  her  house  in  San  Francisco? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  buy  her  library? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Did  you  not  take  the  house  with  the  papers  in  it? 

Mr.  HUNTINGTON.  I  took  the  house  with  the  wall  papers. 

Senator  MORGAN.  No  other  papers? 

Mr.  HUNTINGTON.  No  others  that  I  know  of. 

Senator  MORGAN.  And  did  you  not  destroy  the  papers  after  you 
bought  the  house? 

Mr.  HUNTINGTON.  If  you  charge  me  with  it,  I  will  answer  you. 

Senator  MORGAN.  It  is  charged  by  men  who  are  probably  as  good 
as  you  or  I. 

Mr.  HUNTINGTON.  Oh ;  they  are  very  good  men. 

Senator  MORGAN.  What  is  your  answer? 

Mr.  HUNTINGTON.  I  destroyed  no  papers,  and  I  do  not  know  that 
sucn  a  thing  was  ever  charged,  although  I  suppose  that  these  men  in 
San  Francisco,  if  they  had  thought  of  it,  would  have  charged  it. 

Senator  MORGAN.  Did  you  not  receive  papers  which  were  turned 
over  to  you  when  Mrs.  Colton  sold  you  that  house,  which  papers 
belonged  to  her  husband's  estate  and  were  connected  with  these  railroad 
transactions  ? 

Mr.  HUNTINGTON.  I  did  not  destroy  any  papers. 

Senator  MORGAN.  Did  any  agent  of  yours  do  so? 

Mr.  HUNTINGTON.  No;  I  am  sure  that  nobody  did. 

Senator  MORGAN.  Did  you  buy  that  house  for  a  residence! 

Mr.  HUNTINGTON.  I  did. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  267 

Senator  MORGAN.  Have  you  lived  in  it? 

Mr.  HUNTINGDON.  Yes. 

Senator  MORGAN.  When  you  took  possession  of  it,  did  you  find  any 
of  Colton's  papers  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  That  is  the  first  positive  answer  which  you  have 
given. 

Mr.  HUNTINGTON.  I  have  answered  the  same  question  before,  but  I 
answer  it  now  in  another  way.  That  is  all. 

Senator  MORGAN.  I  am  glad  you  are  so  emphatic.  Did  you  settle 
your  controversy  with  Mrs.  Col  ton  by  buying  the  house? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  How  did  you  settle  it? 

Mr,  HUNTINGTON.  I  paid  her  the  money  for  the  house  about  two 
years  ago. 

Senator  MORGAN.  How  did  you  pay  for  the  other  part  of  the  busi- 
ness, about  which  she  had  that  suit  against  you? 

Mr.  HUNTINGTON.  I  think  the  best  way  to  get  at  that  would  be  to 
get  the  records  of  the  court.  I  do  not  know  anything  about  it;  I  was 
not  there.  We  settled  with  Mrs.  Colton. 

Senator  MORGAN.  Who  are  "  we?  " 

Mr.  HUNTINGTON.  The  parties  in  interest. 

Senator  MORGAN.  Who  are  they? 

Mr.  HUNTINGTON.  Mr.  Stanford  and  Mr.  Crocker  and  Mrs.  Hopkins. 

Senator  MORGAN.  What  did  you  give  her? 

Mr.  HUNTINGTON.  We  gave  her,  as  I  recollect,  $200,000. 

Senator  MORGAN.  In  money  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  In  what? 

Mr.  HUNTINGTON.  In  Southern  Pacific  bonds. 

Senator  MORGAN.  I  suppose  she  has  them  yet? 

Mr.  HUNTINGTON.  I  do  not  know  anything  about  it. 

Senator  MORGAN.  Now,  get  back  to  the  contract.  We  have  found 
out  now,  to  the  best  of  your  belief  and  supposition,  that  this  road 
between  Gilroy  and  Yuma  was  built  by  the  Western  Development  Com- 
pany, or  by  the  Pacific  Improvement  Company? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  By  one  or  both  ? 

Mr.  HUNTINGTON.  I  think  by  both. 

Senator  MORGAN.  In  building  that  road,  did  not  the  Southern  Pacific 
Company,  which  belonged  to  these  four  gentlemen,  make  the  contract 
for  building  the  road  with  either  the  Western  Development  Company 
or  the  Pacific  Improvement  Company? 

Mr.  HUNTINGTON.  I  should  say  they  did;  I  think  there  were  other 
interests  in  the  Southern  Pacific  at  the  time. 

Senator  MORGAN.  These  other  interests  were  the  controlling  interests  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Were  not  the  minor  interests  very  small  interests? 

Mr.  HUNTINGTON.  Yes,  I  should  say  so;  they  were  not  as  large  as 
the  majority  interests. 

Senator  MORGAN.  In  making  your  contract  for  building  this  road 
did  you  consult  the  other  minor  interests  ? 

Mr.  HUNTINGTON.  All  interests,  I  am  satisfied,  knew  what  was  being 
done. 

Senator  MORGAN.  Did  you  consult  this  minor  interest,  or  did  you 
make  the  contract  on  your  own  account! 


268  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTING-TON.  I  can  not  answer  that;  but  I  have  no  doubt  they 
all  knew  it. 

Senator  MORGAN.  You  mean  that  you  do  not  know  whether  they  were 
consulted  or  not? 

Mr.  HUNTINGTON.  I  assume  that  they  were. 

Senator  MORGAN.  Do  you  know  anything  about  it! 

Mr.  HUNTINGTON.  I  presume  that  they  were  consulted.  I  did  not 
do  it  myself. 

Senator  MORGAN.  That  bringe  me  to  the  point  which  I  left  some  time 
ago,  when  you  wandered  off.  That  was,  whether  you  did  not  really 
frame  the  terms  of  these  contracts  for  building  the  Southern  Pacific 
road. 

Mr.  HUNTINGTON.  No,  I  do  not  think  I  did;  I  do  not  think  I  framed 
any  of  them. 

Senator  MORGAN.  I  do  not  mean  that  you  wrote  them  out;  I  mean 
did  you  frame  them  in  your  mind? 

Mr.  HUNTINGTON.  No;  my  impression  is  that  they  were  done  in  Cali- 
fornia, and  that  I  was  told  they  were  done.  I  do  not  think  they  were 
done  without  my  knowledge. 

Senator  MORGAN.  Or  without  your  consent? 

Mr.  HUNTINGTON.  I  should  say  that  they  had  my  consent. 

Senator  MORGAN.  By  whom  were  these  contracts  made  if  they  were 
not  framed  by  you  ? 

Mr.  HUNTINGTON.  I  suppose 

Senator  MORGAN.  I  do  not  want  any  suppositions.  If  you  do  not 
recollect,  say  that  you  do  not  recollect. 

Mr.  HUNTINGTON.  I  do  not  recollect.  I  presume  that  Judge  Sander- 
son framed  them.  He  was  our  chief  attorney. 

Senator  MORGAN.  Judge  Sanderson  did  not  make  the  contracts. 

Mr.  HUNTINGTON.  He  probably  drew  the  contracts. 

Senator  MORGAN.  I  am  speaking  of  making  them.  I  am  speaking  of 
the  negotiation,  and  the  conclusions  of  this  negotiation  in  the  agree- 
ment. Who  negotiated  the  contract,  who  concluded  the  contract,  and 
who  instructed  the  attorney  how  to  prepare  it? 

Mr.  HUNTINGTON.  I  think  that  Mr.  Hopkins,  probably,  in  his  lifetime, 
would  have  had  more  to  do  with  it  than  anybody  else. 

Senator  MORGAN.  Mr.  Hopkins,  I  understood  you  to  testify,  was  your 
universal  partner  in  all  of  this  railroad  business? 

Mr.  HUNTINGTON.  He  was  not  my  universal  partner  exactly.  He  was 
my  partner  in  the  hardware  and  metal  trade. 

Senator  MORGAN.  You  have  frequently  said  that  he  was. 

Mr.  HUNTINGTON.  I  may  have  said  so;  but  he  was  not  my  partner 
in  the  railroad  business.  He  was  a  codirector  and  stockholder  with  me. 

Senator  MORGAN.  Was  he  your  partner  in  any  of  those  transactions 
relating  to  the  railroads? 

Mr.  HUNTINGTON.  No ;  not  in  any  transactions  relating  to  the  rail- 
roads. 

Senator  MORGAN.  That  is  rather  an  important  point.  I  believe  that 
you  said,  on  some  occasions  here,  that  Mr.  Hopkins  did  whatever  he 
pleased,  and  that  whatever  he  did  was  all  right  with  you? 

Mr.  HUNTINGTON.  I  say  that  now. 

Senator  MORGAN.  Then  it  was  because  he  was  your  universal  agent 
and  not  because  he  was  your  universal  partner? 

Mr.  HUNTINGTON.  It  was  because  he  was  a  man  in  whom  I  had  great 
confidence*  He  was  a  partner  of  mine  in  the  hardware  and  metal 
trade. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  269 

Senator  MORGAN.  Was  lie  your  agent  to  whom  you  delegated  author- 
ity to  transact  for  you  any  and  all  business  connected  with  these  various 
railroad  operations  in  which  he  and  you  were  concerned? 

Mr.  HUNTINGTON.  I  should  say  he  was  not  my  agent.  He  was  the 
man  who  attended  to  these  things  and  in  whom  I  had  so  much  confi- 
dence. 

Senator  MORGAN.  So  that  he  was  neither  your  agent  nor  your  part- 
ner? 

Mr.  HUNTINGTON.  Perhaps  I  should  say  that  he  was  not.  He  was 
my  partner  in  the  hardware  and  metal  trade. 

Senator  MORGAN.  He  was  a  man  in  whom  you  had  such  blind  faith 
that  you  intrusted  to  him  the  full  disposal  and  management  of  your 
business  and  accepted  what  he  did  without  question  ? 

Mr.  HUNTINGTON.  I  would  not  call  it  blind  faith.  I  knew  Mark  Hop- 
kins and  trusted  him,  not  blindly,  but  because  I  knew  he  was  right. 

Senator  MORGAN.  I  am  talking  about  your  blind  confidence  in  him. 

Mr.  HUNTINGTON.  It  was  not  a  blind  confidence ;  it  was  a  confidence 
in  the  man  that  he  would  do  just  what  was  right. 

Senator  MORGAN.  Did  you  surrender  to  him,  to  the  extent  you  have 
just  said,  the  full  and  absolute  control  of  your  business  in  connection 
with  these  railroads,  so  as  to  authorize  him  to  bind  you  to  any  contract 
he  chose  to  make,  to  receive  any  payment  which  was  coining  to  you, 
and  to  dispose  of  your  bonds,  stock,  or  other  assets  or  property  in  con- 
nection with  these  railroads,  without  question  on  your  part,  and  with 
the  understanding  with  him  that  he  had  a  perfect  authority  to  do  these 
things? 

Mr.  HUNTINGTON.  As  to  perfect  authority,  I  would  not  know  how  to 
answer.  He  had  my  confidence  to  do  anything  for  me  which  he  saw 
fit,  and  I  have  no  doubt  that  I  should  have  approved  of  whatever  he  did. 

Senator  MORGAN.  You  have  no  doubt  that  you  should  have  approved ; 
have  you  any  doubt  that  you  did  approve? 

Mr.  HUNTINGTON.  No;  I  am  satisfied  that  I  did  approve. 

Senator  MORGAN.  Then  you  made  him  your  agent,  by  ratification,  if 
not  by  appointment? 

Mr.  HUNTINGTON.  Just  what  the  word  agent  may  imply  I  can  not 
say;  but  I  trusted  him  in  everything,  and  I  know  that  he  never  failed 
me  in  anything. 

Senator  MORGAN.  And  the  same  relations  which  we  have  been  just 
trying  to  describe  here  extended  to  all  the  transactions  which  you 
have  had,  and  to  all  these  railroad  and  construction  companies  at  all 
times  as  long  as  Hopkins  lived? 

Mr.  HUNTINGTON.  I  think  tbat  is  trae. 

Senator  MORGAN.  Except  that  you  and  he  were  partners  in  the  hard- 
ware and  metal  business? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  ever  settle  up  that  partnership? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  much  money  did  you  get  out  of  it? 

Mr.  HUNTINGTON.  I  do  not  know;  we  got  dividends  all  the  time. 

Senator  MORGAN.  On  the  final  settlement  of  the  business,  how  much 
money  did  you  get  out  of  it  ? 

Mr.  HUNTINGTON.  I  can  not  say.  Just  before  Mr.  Hopkins  died  we 
reorganized  the  "  Huntington  &  Hopkins  Company." 

Senator  MORGAN.  The  Hardware  and  Metal  Company? 

Mr.  HUNTINGTON.  Yes;  and  we  took  in  three  of  our  clerks. 

Senator  MORGAN.  Was  that  a  corporation  or  a  partnership? 


270  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  It  was  a  corporation.  It  bad  been  a  partnership 
up  to  that  time  we  took  in  three  clerks;  and  when  the  business  got  a 
little  slow,  and  a  dry  rot  was  getting  in,  I  told  Hopkins  to  sell  out,  and 
we  did  so. 

Senator  MORGAN.  How  long  did  that  new  corporation  last"? 

Mr.  HUNTINGTON.  To  the  best  of  my  recollection  it  lasted  about 
twenty  years. 

Senator  MORGAN.  And  when  did  the  dry  rot  get  into  it? 

Mr.  HUNTINGTON.  Things  got  a  little  slow. 

Senator  MORGAN.  When? 

Mr.  HUNTINGTON.  I  can  not  tell,  exactly. 

Senator  MORGAN.  Not  very  early  in  the  twenty  years t 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Not  very  late  in  the  twenty  years'? 

Mr.  HUNTINGTON.  Not  very  late,  either.  I  think  in  about  three  or 
four  years. 

Senator  MORGAN.  When  the  dry  rot  had  worked  you  out  of  the  busi- 
ness, how  much  did  you  get  out  of  it  in  money  or  value? 

Mr.  HUNTINGTON.  The  stock  was  $1,500,000,  and  I  think  we  got 
about  par  for  the  stock. 

Senator  MORGAN.  How  much  did  you  get  out  of  it? 

Mr.  HUNTINGTON.  I  had  about  one-tenth  interest  in  it — perhaps 
more  than  that  or  perhaps  not  as  much ;  I  forget. 

Senator  MORGAN.  That,  then,  was  a  final  settlement  of  the  whole 
hardware  and  metal  business? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  From  beginning  to  end? 

Mr.  HUNTINGTON.  That  was  the  wind-up. 

Senator  MORGAN.  But  in  the  meantime  you  had  drawn  out  divi- 
dends? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  much? 

Mr.  HUNTINGTON.  I  do  not  know.    We  had  done  fairly  well. 

Senator  MORGAN.  What  would  you  call  fairly  well  for  an  average 
annual  dividend  ? 

Mr.  HUNTINGTON.  I  do  not  know.  I  think  we  made  some  12  per  cent 
per  annum. 

Senator  MORGAN.  For  thirty  years? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  was  the  capital  stock? 

Mr.  HUNTINGTON.  We  had  $1,500,000  in  the  corporation. 

Senator  MORGAN.  How  much  of  that  capital  stock  did  you  take  and 
how  much  did  Hopkins  take? 

Mr.  HUNTINGTON.  I  forget  just  what  we  gave  the  boys  when  they 
came  in.  We  sold  out  to  them,  and  we  trusted  them  mostly  for  their 
shares.  I  do  not  know  just  what  the  division  was.  I  think  that  Mr. 
Hopkins  and  I  had  about  one-half  and  that  the  three  boys  had  the 
other  half. 

Senator  MORGAN.  Did  you  give  the  boys  one-half  ? 

Mr.  HUNTINGTON.  I  think  we  did. 

Senator  MORGAN.  They  paid  up,  did  they? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  So  that  you  and  Hopkins  got  your  $1,500,000? 

Mr.  HUNTINGTON.  No;  we  had  our  proportion.  When  Mr.  Hopkins 
died  the  concern  bought  his  interest. 

Senator* MORGAN.  When  you  sold  the  stock  to  the  boys  who  got  the 
money  for  it? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  271 

Mr.  HUNTINGDON.  Mr.  Hopkins  and  myself  did. 

Senator  MORGAN.  That  was  $1,500,000  in  all? 

Mr.  HUNTINGDON.  No.    Whatever  they  agreed  to  pay  they  paid. 

Senator  MORGAN.  At  the  time  you  and  Hopkins  first  entered  the 
hardware  and  metal  business  how  much  money  did  you  put  in  it? 

Mr.  HUNTINGTON.  I  do  not  recollect;  I  think  I  had,  as  I  recollect, 
some  couple  of  hundred  thousand  dollars. 

Senator  MORGAN.  Which  you  had  put  in  there? 

Mr.  HUNTINGTON.  No;  it  was  in  there.    He  came  in  with  me  in  1855. 

Senator  Morgan.  Did  he  put  in  as  much  as  you  put  in? 

Mr.  HUNTINGTON.  Yes;  that  was  the  arrangement. 

Senator  MORGAN.  A  couple  of  hundred  thousand  for  you  and  the 
same  amount  for  him  would  be  $400,000? 

Mr.  HUNTINGTON.  Yes ;  two  and  two  are  four. 

Senator  MORGAN.  Did  you  run  the  railroad  business  or  the  construc- 
tion business  into  the  hardware  and  metal  business  ? 

Mr.  HUNTINGTON.  No;  I  would  like  to  say  right  here — and  perhaps 
it  is  proper  to  say — that  Huntington  &  Hopkins  never  sold  a  wheel,  an 
axle,  a  spoke,  or  a  rail,  or  anything  whatever  for  the  construction  of  the 
road,  and  never  had  any  commission  on  it. 

Senator  MORGAN.  So  that  you  did  not  run  the  railroad  business  into 
the  hardware  and  metal  business  at  all  in  any  form  or  shape? 

Mr.  HUNTINGTON.  No;  we  may  have  sold  a  dozen  files  or  so  to  con- 
tractors, but  in  any  of  the  great  machinery  and  tools  used  in  building 
or  operating  the  road  Huntington  &  Hopkins,  as  a  concern,  was 
never  interested  and  never  got  a  farthing. 

Senator  MORGAN.  That  corporation  did  not  lend  any  money  to  the 
railroad  company,  did  it? 

Mr.  HUNTINGTON.  We  were  lending  money;  we  may  have. 

Senator  MORGAN.  Did  you? 

Mr.  HUNTINGTON.  I  think  that  perhaps  in  the  course  of  business 
we  did ;  but  I  do  not  know. 

Senator  MORGAN.    How  much  did  you  lend  to  it? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  What  makes  you  think  you  did  ? 

Mr.  HUNTINGTON.  I  think  we  did,  but  I  would  not  swear  positively. 
I  have  very  little  doubt  that  we  did. 

Senator  MORGAN.  If  the  Huntington  &  Hopkins  corporation  raised 
the  value  of  its  assets  from  $400,000  to  $1,500,000  how  much  money  did 
you  have  in  that  corporation  to  put  into  this  railroad  company? 

Mr.  HUNTINGTON.  We  did  not  put  in  all  the  money  that  we  had. 
We  had  various  interests. 

Senator  MORGAN.  I  am  talking  about  this  particular  one. 

Mr.  HUNTINGTON.  We  made  money  all  the  time.  In  1854  I  made  in 
eight  months  $854,000  out  of  the  hardware  trade  myself. 

Senator  MORGAN.  I  am  trying  to  find  out  not  what  you  made  but 
what  you  put  into  the  railroad  business  out  of  the  hardware  and  metal 
business. 

Mr.  HUNTINGTON.  Enough  to  make  things  run  smoothly  and  to  pay 
the  debts  of  the  railroad  company  as  they  became  due. 

Senator  MORGAN.  That  is  a  very  delightful  answer,  stated  over  and 
over  again.  How  much  money  did  you  withdraw  out  of  the  hardware 
and  metal  business  and  put  into  the  railroad  in  Which  you  and  Hop- 
kins were  interested  ? 

Mr.  HUNTINGTON.  I  will  answer  it  as  I  have  answered  it  five  or  six 
times,  I  do  not  know. 

Senator  MORGAN.  Do  you  know  whether  you  put  any  in? 


272  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  am  quite  sure  we  did,  but  I  cau  not  tell  the 
dates  or  tlie  amounts.  When  the  railroad  company  was  snort  of  money 
they  had  to  scratch  around. 

Senator  MORGAN.  Mr.  Huntington,  you  know  the  difference  between 
putting  money  into  a  business  and  lending  money  to  that  business.  In 
your  transactions  between  the  hardware  and  metal  business  and  the 
railroad  company,  did  you  lend  money  to  the  railroad  company  or  did 
you  take  money  out  of  the  hardware  and  metal  business  and  put  it  into 
the  railroad  business  ? 

Mr.  HUNTINGTON.  I  have  no  doubt  that  we  did  both.  These  things 
were  done  in  California  when  I  was  in  New  York.  Mr.  Hopkins 
attended  to  them,  and  did  whatever  was  necessary. 

Senator  MORGAN.  He  was  your  partner  ? 

Mr.  HUNTINGTON.  He  was  my  partner  in  the  hardware  and  metal 
business. 

Senator  MORGAN.  If  he  had  the  right,  as  partner,  to  put  your  money 
in  the  railroad  business  and  did  do  it,  did  you  not  continue  to  be  part- 
ners to  the  extent  of  the  money  that  he  put  in? 

Mr.  HUNTINGTON.  No;  if  we  lent  money  to  a  corporation  we  took 
its  note  to  Huntiugton  &  Hopkins. 

Senator  MORGAN.  Did  you  lend  money  to  the  Central  Pacific  Com- 
pany, or  did  you  put  it  in  I 

Mr.  HUNTINGTON.  I  presume  it  was  done  in  both  ways.  If  we  took 
money  out  of  the  business  and  bought  bonds,  Mr.  Hopkins  would  always 
lay  by  half  for  me  and  half  for  himself. 

Senator  MORGAN.  I  am  not  talking  about  buying  bonds.  I  am  talk- 
ing about  building  the  Central  Pacific,  and  the  Southern  Pacific,  and 
other  roads;  that  is  what  I  am  talking  about;  and  I  wish  you  would 
confine  your  attention  to  that.  Did  the  hardware  and  metal  company 
take  money  out  of  its  business  and  put  it  into  any  of  these  various 
enterprises;  and  if  so,  into  which? 

Mr.  HUNTINGTON.  I  can  not  say.  As  I  have  answered  a  number  of 
times,  if  we  took  money  out  it  was  charged  to  the  individual. 

Senator  MORGAN.  How  do  you  know? 

Mr.  HUNTINGTON.  Because  that  is  the  way  to  do  it. 

Senator  MORGAN.  You  say  you  do  not  know? 

Mr.  HUNTINGTON.  No;  but  that  is  the  way  to  do  it.  There  are 
certain  ways  of  doing  business  in  a  commercial  house. 

Senator  MORGAN.  You  do  not  know  that  the  money  was  ever  taken 
out  of  the  "Huntington  &  Hopkins"  business? 

Mr.  HUNTINGTON.  I  am  satisfied  that  it  was,  but  I  can  not  swear  to  it. 

Senator  MORGAN.  But  if  it  was  taken  out  you  know  that  it  was 
charged  to  the  individual? 

Mr.  HUNTINGTON.  That  is  the  way  to  do  it. 

Senator  MORGAN.  Do  you  know  anything  about  it? 

Mr.  HUNTINGTON.  That  is  the  only  way  to  do  it. 

Senator  MORGAN.  Do  you  know  anything  about  it? 

Mr.  HUNTINGTON.  I  did  not  know  from  day  to  day. 

Senator  MORGAN.  Well,  from  hour  to  hour,  or  from  year  to  year? 

Mr.  HUNTINGTON.  I  know  that  everything  was  done  in  a  business 
manner;  I  did  not  know  from  day  to  day  what  was  done.  I  was  not 
there;  I  was  in  New  York. 

Senator  MORGAN.  Then,  how  do  you  know  that  the  money  which 
was  taken  out  was  charged  to  the  individual  accounts? 

Mr.  HUNTINGTON.  That  was  the  only  way  to  do  it.  After  the  boys 
came  in  they  had  nothing  to  do  with  it~ 


GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS.  273 

Senator  MORGAN.  That  is  a  very  thin  argument;  and  I  would  like  to 
get  rid  of  it,  and  get  at  some  semblance  of  the  facts  of  this  business. 
I  want  to  know  whether  you  did  know  that  this  money  which  was 
taken  out  of  the  business  by  Hopkins  was  charged  to  his  or  to  your 
individual  accounts? 

Mr.  HUNTINGTON.  It  ought  to  have  been. 

Senator  MORGAN.  Do  you  know  that  it  was  f 

Mr.  HUNTINGTON.  I  can  say  nothing  more  than  that  it  ought  to  have 
been  and  that  I  have  no  doubt  that  it  was. 

Senator  MORGAN.  You  have  no  doubt  that  money  was  taken  out  of 
this  hardware  and  metal  business  and  put  into  the  railroad  business  ? 

Mr.  HUNTINGTON.  I  have  no  doubt  that  Mr.  Hopkins  took  out  money 
and  lent  money  and  bought  securities  and  paid  for  them. 

Senator  MORGAN.  That  is  not  the  question,  and  you  can  not  dodge  it. 

Mr.  HUNTINGTON.  I  am  not  trying  to  dodge  it. 

Senator  MORGAN.  Did  Mr.  Hopkins  put  any  of  the  money  of  the 
hardware  and  metal  company  into  the  business  of  building  railroads? 

Mr.  HUNTINGTON.  No;  I  think  not.  If  he  took  it  out  it  should  have 
been  charged  to  Mr.  Hopkins  and  myself.  Huntington  &  Hopkins 
may  have  lent  money  to  the  railroad  company,  and,  if  so,  it  would  have 
taken  the  company's  note. 

The  CHAIRMAN.  If  you  had  done  that,  the  amount  would  have  been 
charged  in  your  cash  book  to  " bills  receivable?" 

Mr.  HUNTINGTON.  Certainly. 

Senator  MORGAN.  Was  it? 

Mr.  HUNTINGTON.  It  ought  to  have  been.    Do  you  suppose  I  can  sit 
here  and  give  details  of  business  thirty- five  years  back?    That  is  ask 
ing  too  much  of  me. 

Senator  MORGAN.  It  seems  to  me  that  you  know  some  things  in 
your  own  favor,  and  that  you  know  nothing  against  yourself. 

Mr.  HUNTINGTON.  I  know  some  things;  and  other  things  I  do  not 
know. 

Senator  MORGAN.  Have  you  not,  on  various  occasions,  and  in  your 
deposition  before  the  United  States  Pacific  Kailroad  Commission,  stated 
that  Mr.  Hopkins  was  your  general  partner? 

Mr.  HUNTINGTON.  If  I  have  stated  that,  I  have  made  a  mistake.  He 
was  my  partner  in  the  hardware  and  metal  business,  but  not  in  the 
railroad  business. 

Senator  MORGAN.  Did  you  settle  up  all  these  transactions  with  the 
Hopkins  estate  after  he  died  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Were  the  hardware  business  and  railroad  business 
and  all  the  other  transactions  between  you  carried  into  that  settlement! 

Mr.  HUNTINGTON.  Not  together.    They  would  be  entirely  distinct. 

Senator  MORGAN.  Were  they  carried  into  the  settlement? 

Mr.  HUNTINGTON.  Not  into  the  settlement  of  the  hardware  and  metal 
business. 

Senator  MORGAN.  No,  but  into  the  general  settlement. 

Mr.  HUNTINGTON.  There  was  no  general  settlement.  The  widow 
took  the  interest  and  carried  on  the  estate. 

Senator  MORGAN.  Have  you  never  had  a  settlement  with  Mrs. 
Hopkins? 

Mr.  HUNTINGTON.  I  think  not.  There  may  have  been,  but  I  do  not 
think  there  was. 

Senator  MORGAN.  You  had  a  division  of  the  assets  and  credits  and 
moneys? 

PR 18 


274  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  think  that  Mrs.  Hopkins  kept  right  ou  and  took 
her  husband's  place  in  the  business. 

Senator  MORGAN.  Has  she  the  same  business  relations  with  you  now 
that  Hopkins  had  at  the  time  of  his  death  ? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  So  you  are  conducting  the  business? 

Mr.  HUNTINGTON.  Yes;  she  is  in  the  business. 

Senator  MORGAN.  What  business? 

Mr.  HUNTINGTON.  Building  roads. 

Senator  MORGAN.  You  are  not  building  roads  now? 

Mr.  HUNTINGTON.  Yes,  all  the  time. 

Senator  MORGAN.  In  other  words,  Mrs.  Hopkins  represents  her  hus- 
band's interest  in  the  company  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  company  is  that? 

Mr.  HUNTINGTON.  The  Pacific  Improvement  Company. 

Senator  MORGAN.  Is  that  company  still  in  operation? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  Mrs.  Hopkins  still  has  her  interest  in  it? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  are  still  managing  it? 

Mr.  HUNTINGTON.  No;  Mr.  Dalty  is  president  of  it.  He  has  all  the 
management  of  it. 

Senator  STEWART.  Has  the  representative  of  Mrs.  Hopkins  been 
still  carrying  on  the  same  business? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Who  is  that? 

Mr.  HUNTINGTON.  Mr.  Eussell  Wilson.  He  is  the  director  in  the 
company  for  Mrs.  Hopkins. 

Senator  MORGAN.  He  is  not  the  representative  of  the  Hopkins 
estate,  but  the  representative  of  Mrs.  Hopkins  ? 

Mr.  HUNTINGTON.  I  think  the  estate  is  all  settled  up. 

Senator  BRICE.  Mr.  Huntington,  you  mean  Mrs.  Stanford,  do  you  not? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  I  was  talking  about  Mrs.  Hopkins. 

Mr.  HUNTINGTON.  Mrs.  Hopkins  is  dead. 

Senator  MORGAN.  She  had  an  administrator? 

Mr.  HUNTINGTON.  Mr.  Searles  was  her  husband.  I  will  say  for  Mrs. 
Stanford  what  I  said  for  Mrs.  Hopkins.  The  interest  of  Mrs.  Hopkins 
is  going  right  along;  but  it  is  now  owned  by  Mr.  Searles,  who  was  her 
husband.  It  is  taken  care  of  by  General  Hubbard. 

Senator  MORGAN.  Mr.  Hopkins  is  dead  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Who  was  his  administrator? 

Mr.  HUNTINGTON.  Mrs.  Hopkins. 

Senator  MORGAN.  Did  you  ever  settle  your  accounts  with  her? 

Mr.  HUNTINGTON.  I  had  no  accounts  with  her. 

Senator  MORGAN.  You  had  no  accounts  with  her? 

Mr.  HUNTINGTON.  Not  railroad  accounts.    I  had  none. 

Senator  MORGAN.  But  you  and  Hopkins  were  partners? 

Mr.  HUNTINGTON.  That  was  in  the  hardware  and  metal  trade. 

Senator  MORGAN.  Did  you  settle  that? 

Mr.  HUNTINGTON.  That  was  settled  up  soon  after  his  death. 

Senator  MORGAN.  By  whom  ? 

Mr.  HUNTINGTON.  Mrs.  Hopkins  did  not  want  to  carry  on  the  busi- 
ness, and  Huntington,  Hopkins  &  Co.  bought  her  interest  out. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  275 

SeDator  MORGAN.  Mrs.  Hopkins,  then,  sold  out  her  interest  in  the 
hardware  business? 

Mr.  HuNTiNGTON.  Yes. 

Senator  MORGAN.  And  in  the  corporation  I 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  To  the  boys  and  you? 

Mr.  HUNTINGTON.  To  the  concern. 

Senator  MORGAN.  As  to  the  railroad  business;  did  you  have  any 
settlement  with  the  Hopkins  administrator  at  all? 

Mr.  HUNTINGTON.  I  do  not  know.  There  may  have  been  some  unset- 
tled matters  between  Mr.  Hopkins  and  myself  at  the  time  of  his  death, 
and,  if  so,  they  were  settled  up.  He  died  in  1879,  as  I  recollect,  and 
we  had  then  sold  out  most  of  our  stuff. 

Senator  MORGAN.  When  Hopkins  died  did  he  have  any  of  your 
money  or  property  in  his  possession. 

Mr.  HUNTINGTON.  Very  little,  if  any. 

Senator  MORGAN.  When  did  he  settle  with  you,  before  he  died  ? 

Mr.  HUNTINGTON.  I  do  not  recollect.  What  we  sold  was  stuff  that 
we  were  carrying  to  pay  the  debts  of  the  Contract  and  Finance  Company, 
largely,  and  other  matters.  It  was  sold  and  the  debts  were  paid,  and 
there  was  something  left.  I  think  that  that  was  in  the  Contract  and 
Finance  Company.  The  residuum  was  there.  After  paying  our  debts 
there  was  something  over  and  that  we  divided. 

Senator  MORGAN.  Then,  at  the  time  Mr.  Hopkins  died,  he  had  very 
little  of  your  property  in  his  possession? 

Mr.  HUNTINGTON.  I  do  not  know  that  he  had  any.  Possibly  there 
might  have  been  some. 

Senator  MORGAN.  That  matter  has  been  settled  up  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  By  whom? 

Mr.  HUNTINGTON.  I  suppose  that  whatever  balance  there  was  either 
way  was  settled.  I  may  have  done  it  myself. 

Senator  MORGAN.  With  whom  did  you  settle,  if  you  did  it  yourself? 

Mr.  HUNTINGTON.  I  think  it  must  have  been  with  Mrs.  Hopkins. 
She  was  a  very  capable  woman.  There  was  very  little  to  be  settled,  I 
am  quite  sure. 

Senator  MORGAN.  Did  Mrs.  Hopkins  live  then  at  Sacramento? 

Mr.  HUNTINGTON.  No;  she  lived  at  San  Francisco. 

Senator  MORGAN.  And  so  the  records  of  the  probate  court  in  San 
Francisco  will  sliow  what  settlement  was  made? 

Mr.  HUNTINGTON.  I  do  not  know  whether  they  will  or  not. 

Senator  MORGAN.  When  Mr.  Hopkins  died  your  interests  and  his 
had  been  separated  in  all  of  these  several  companies? 

Mr.  HUNTINGTON.  About  that  time  there  was  a  market  for  these 
stocks,  so  that  we  sold  a  great  many,  and,  I  guess,  paid  off  the  debts 
of  the  Contract  and  Finance  Company. 

Senator  MORGAN.  Your  interests  were  separated ;  that  is  to  say,  they 
were  no  longer  united? 

Mr.  HUNTINGTON.  We  never  had  any  united  interests  in  the  rail- 
road; but  Mr.  Hopkins  kept  our  books,  and  kept  them  very  strictly, 
and  whatever  was  due  to  me  was  handed  over  to  me. 

Senator  MORGAN.  But  in  all  of  these  other  companies  you  and 
Hopkins  stood  as  stockholders  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  your  interests  in  the  companies  were  denned 
by  the  amount  of  stock  you  held? 


276  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  IIUNTINGTON.   YeS. 

Senator  MORGAN.  So  that,  in  this  way,  your  interests  were  separate 
before  his  death? 

Mr.  HUNTINGTON.  They  were  always  so.  We  never  jointly  took  any 
stock  in  any  railroad  companies. 

Senator  MORGAN.  What  other  companies  did  you  and  Mr.  Hopkins 
take  stock  in  jointly? 

Mr.  HUNTINGTON.  I  do  not  know.  I  am  quite  sure  we  were  in  all 
those  construction  companies. 

Senator  MORGAN.  As  joint  owners  of  stock? 

Mr.  HUNTINGTON.  No;  not  as  joint  owners.  We  were  never  joint 
owners  in  any  of  the  railroad  companies  or  in  any  construction  business. 

Senator  MORGAN.  Your  joint  ownership,  then,  was  confined  to  your 
interests  in  the  hardware  and  metal  company? 

Mr.  HUNTINGTON.  Yes;  and  to  things  growing  out  of  that  business. 

Senator  MORGAN.  All  of  these  transactions  were  done  outside  of  this 
firm? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  property  did  you  have  at  the  time  you 
formed  this  agreement  or  partnership  with  Mr.  Hopkins  to  establish  a 
hardware  and  inetal  company,  besides  that  which  you  put  into  that 
company  ? 

Mr.  HUNTINGTON.  1  do  not  remember  at  this  time,  but  I  always  had 
property.  I  was  a  merchandise  speculator  a  good  many  years,  myself— 
a  large  merchandise  speculator. 

Senator  MORGAN.  Did  you  have  any  other  active  business  at  that 
time? 

Mr.  HUNTINGTON.  No;  not  any  that  you  might  say  was  regular  cur- 
rent business. 

Senator  MORGAN.  Did  you  have  any  money  that  you  received  out  of 
the  hardware  and  metal  business  at  the  time  of  the  organization  of  the 
Central  Pacific  Company? 

Mr.  UUNTINGTON.  I  had  money  outside. 

Senator  MORGAN.  How  much  ? 

Mr.  HUNTINGTON.  I  can  not  say. 

Senator  MORGAN.  About  how  much  ? 

Mr.  HUNTINGTON.  I  do  not  know;  it  is  a  long  time  ago. 

Senator  MORGAN.  Was  it  out  of  the  money  which  you  had  outside 
of  the  hardware  and  inetal  business  that  you  found  means  to  put 
money  into  the  Central  Pacific? 

Mr.  HUNTINGTON.  No;  we  were  making  money  very  fast. 

Senator  MORGAN.  I  am  talking  about  the  time  of  the  organization 
of  the  Central  Pacific. 

Mr.  HUNTINGTON.  Yes;  about  1861. 

Senator  MORGAN.  I  want  to  know  what  money  you  had,  outside  of 
the  hardware  and  metal  business,  to  put  into  the  Central  Pacific? 

Mr.  HUNTINGTON.  I  had  considerable.  I  had  money;  and  1  presume 
I  had  merchandise.  I  was  always  buying  merchandise  in  San  Fran- 
cisco. 

Senator  MORGAN.  You  did  not  put  merchandise  into  it? 

Mr.  HUNTINGTON.  No;  but  merchandise  means  money. 

Senator  MORGAN.  You  did  not  put  real  estate  into  it? 

Mr.  HUNTINGTON.  I  might.  I  had  some  real  estate  in  Sacramento. 
The  business  house  belonged  to  me,  and  I  had  some  other  real  estate. 

Senator  MORGAN.  How  much  money  out  of  your  own  resources  did 
you  actually  put  into  the  building  of  the  Central  Pacific? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  277 

Mr.  HUNTTNGTON.  I  do  not  remember,  but  it  was  a  very  consider- 
able amount. 

Senator  MORGAN.  I  am  speaking  now  of  the  building  of  the  road, 
from  the  time  you  began  to  the  time  of  its  completion. 

Mr.  HUNTING-TON.  I  do  not  know,  but  I  was  always  able  to  pay  the 
debts  when  they  became  due. 

Senator  MORGAN.  That  will  not  do,  Mr.  Huntington. 

Mr.  HUNTINGTON.  I  am  speaking  about  the  general  results. 

Senator  MORGAN.  I  am  not  speaking  about  the  general  results,  but 
about  facts.  If  you  do  not  wish  to  state  them,  say  so. 

Mr.  HUNTINGTON.  I  am  stating  them  the  very  best  I  know  how. 

Senator  MORGAN.  You  say  you  put  in  a  large  amount  out  of  your 
own  private  resources'? 

Mr.  HUNTINGTON.  It  must  have  been  a  very  considerable  amount. 

Senator  MORGAN.  When  did  you  put  it  in? 

Mr.  HUNTINGTON.  As  the  work  progressed.  Before  we  got  to  New- 
castle we  had  to  use  a  large  amount  of  money. 

Senator  MORGAN.  Did  you  put  it  in  by  buying  stock  of  the  Central 
Pacific,  or  by  buying  stock  of  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  was  not 
organized  until  after  the  road  reached  Newcastle. 

Senator  MORGAN.  Then  you  did  not  buy  stock  of  the  Contract  and 
Finance  Company  with  this  money  that  you  put  in? 

Mr.  HUNTINGTON.  I  did  not  say  that;  I  think  we  did. 

Senator  MORGAN.  lam  not  talking  about  "we"  but  about  "you." 
Did  you  put  any  money  into  the  Central  Pacific  or  the  Contract  and 
Finance  Company  for  which  you  did  not  get  stock? 

Mr.  HUNTINGTON.  Where  we  bought  stock  we  got  stock;  and  where 
we  loaned  money  we  got  the  company  to  pay  for  it ;  and  where  we  bought 
bonds  we  paid  for  them. 

Senator  MORGAN.  Whom  do  you  mean  by  awe?" 

Mr.  HUNTINGTON.  Mark  Hopkins  was  in  my  mind,  but  I  will  say 
myself. 

Senator  MORGAN.  Can  you  not  separate  between  yourself  and  Mark 
Hopkins? 

Mr.  HUNTINGTON.  Mark  and  I  were  together  for  a  great  many  years, 
and  I  always  coupled  him  with  myself.  I  wish  you  had  known  him. 

Senator  MORGAN.  So  that  if  you  were  not  partners  you  were  even 
closer  than  partners? 

Mr.  HUNTINGTON.  Yes,  I  think  so. 

Senator  MORGAN.  I  would  like  to  know  whether,  outside  of  the  prop- 
erty which  you  possessed  and  held  under  the  firm  name  as  part  of  the 
firm  property,  you  put  any  money  into  the  Central  Pacific,  and  if  so 
how  much.  I  mean  you  and  not  Mark  Hopkins. 

Mr.  HUNTINGTON.  I  can  not  say.  It  is  thirty-five  years  ago.  I  did 
put  some  money  in,  because  we  took  stocks  and  bonds. 

Senator  MORGAN.  That  is  not  putting  money  in,  is  it? 

Mr.  HUNTINGTON.  Why,  certainly  it  is.     How  would  you  put  it  in  ? 

Senator  MORGAN.  I  would  suppose  you  would  do  it  by.  buying  the 
stock  and  bonds. 

Mr.  HUNTINGTON.  That  is  what  I  am  talking  about. 

Senator  MORGAN.  And  you  have  now  stated  that  you  did  not  buy  any 
stock  or  bonds  of  the  Central  Pacific  Eailroad  Company,  but  that  the 
Contract  and  Finance  Company  got  the  stock  and  bonds  for  building 
the  road. 

Mr.  HUNTINGTON.  I  do  not  think  I  made  any  such  statement.  I 
said  that  the  road  to  Newcastle  was  built  largely  by  four  men. 


278  GOVERNMENT    DEBT    OF   THE   PACIFIC    RAILROADS. 

Senator  MORGAN.  Did  you,  as  a  separate  individual,  put  any  money 
into  the  stock  and  bonds  either  of  the  Contract  and  Finance  Company 
or  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  Up  to  Newcastle  we  built  the  road  and  paid  for 
it,  and  we  furnished  the  money.  That  is,  I  furnished  my  part  of  the 
money  and  put  it  in  stock  and  bonds,  and,  probably,  some  times  in  the 
notes  of  the  company.  That  was,  I  think,  probable.  I  think  that 
Huntington  &  Hopkins  loaned  them  money;  but  when  I  bought  stock 
I  paid  for  it,  and  when  I  bought  bonds  I  paid  for  them.  That  is  the 
only  way  I  know  of  putting  money  in  to  build  a  railroad. 

Senator  MORGAN.  How  much  stock  of  the  Central  Pacific  did  you 
buy  and  pay  for? 

Mr.  HUNTINGTON.  I  do  not  know.  There  were,  perhaps,  a  couple  of 
thousand  shares.  I  think  I  had  about  two  thousand  shares. 

Senator  MORGAN.  Which  you  bought  and  paid  for  individually? 

Mr.  HUNTINGTON.  Which  I  subscribed  for?    I  think  so. 

Senator  MORGAN.  Did  you  pay  up  your  subscription  ? 

Mr.  HUNTINGTON.  I  should  say  so. 

Senator  MORGAN.  Did  you? 

Mr.  HUNTINGTON.  I  say,  I  should  say  so. 

Senator  MORGAN.  I  ask  you  if  you  did? 

Mr.  HUNTINGTON.  I  say,  I  should  say  so. 

Senator  MORGAN.  You  decline  to  say  whether  you  did  or  not? 

Mr.  HUNTINGTON.  I  am  very  sure  I  did.  I  did  not  pay  it  myself, 
because  the  last  jmyments  were  made  in  installments.  The  first  pay- 
ment was  10  per  cent,  and  as  the  work  progressed  the  investments  were 
paid. 

Senator  MORGAN.  How  many  shares  of  Central  Pacific  stock  did  you 
get  and  pay  for? 

Mr.  HUNTINGTON.  I  think  2,000  shares. 

Senator  MORGAN.  At  what  rate  per  share? 

Mr.  HUNTINGTON.  They  were  $100  shares. 

Senator  MORGAN.  Did  you  pay  in  full  that  amount  of  money? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  Did  you  ever  get  your  money  out? 

Mr.  HUNTINGTON.  Not  that  amount,  probably,  but  I  got  some  at  the 
end.  The  stock  went  up  late  in  the  seventies  and  we  sold  out  and  paid 
the  debts  incurred  in  the  construction  of  the  road. 

Senator  MORGAN.  The  others  did  the  same  thing? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  did  you  four  gentlemen  do  with  your  shares 
when  you  bought  them  ? 

Mr.  HUNTINGTON.  Mr.  Hopkins  kept  mine.  I  did  not  carry  them 
about  with  me. 

Senator  MORGAN.  Did  you  not  capitalize  the  Contract  and  Finance 
Company  with  these  shares  ? 

Mr.  HUNTINGTON.  As  I  understood  it,  these  shares  had  nothing  to 
do  with  that  company.  The  company  never  took  these  shares. 

Senator  MORGAN.  You  took  them  personally? 

Mr.  HUNTINGTON.  Yes;  but  the  Contract  and  Finance  Company 
never  took  them. 

Senator  MORGAN.  I  did  not  ask  you  that  question. 

Mr.  HUNTINGTON.  1  thought  you  did. 

Senator  MORGAN.  I  asked  you  if  you  capitalized  the  Contract  and 
Finance  Company  with  these  shares  ? 

Mr.  HUNTINGTON.  I  do  not  understand. 


GOVERNMENT   DEBT    OF    THE   PACIFIC   RAILROADS.  279 

Senator  MORGAN.  What  capital  did  you  put  into  the  Contract  and 
Finance  Company  ? 

Mr.  HUNTINGTON.  Money. 

Senator  MORGAN.  How  much! 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  You  say  you  paid  your  subscription  to  the  stock 
of  the  Central  Pacific,  100  cents  on  the  dollar,  and  then  you  paid  your 
subscription  to  the  Contract  and  Finance  Company?  How  much? 

Mr.  HUNTINGTON.  I  think  the  capital  of  the  Contract  and  Finance 
Company  was  $5,000,000.  My  impression  is  that  we  paid  in  a  great 
deal  more  than  that. 

Senator  MORGAN.  Did  you  put  more  than  $5,000,000  into  the  capital 
stock  of  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  My  impression  is  that  we  did — very  much  more. 

Senator  MORGAN.  In  money  ? 

Mr.  HUNTINGTON.  Yes,  in  money.    We  had  nothing  else  to  put  it  in. 

Senator  MORGAN.  How  did  you  get  the  money? 

Mr.  HUNTINGTON.  Borrowed  it,  largely. 

Senator  MORGAN.  On  what? 

Mr.  HUNTINGTON.  On  such  stuff  as  we  had. 

Senator  MORGAN.  What  stuff? 

Mr.  HUNTINGTON.  The  bonds  of  the  company. 

Senator  MORGAN.  What  bonds? 

Mr.  HUNTINGTON.  The  bonds  of  the  Central  Pacific. 

Senator  MORGAN.  The  Government  bonds? 

Mr.  HUNTINGTON.  We  may  have  borrowed  money  on  the  Govern- 
ment bonds.  We  borrowed  money  until  we  could  sell  the  bonds. 

Senator  MORGAN.  Then  it  was  not  you  who  were  putting  money  into 
the  Contract  and  Finance  Company,  but  the  Government  of  the  United 
States? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Why  not? 

Mr.  HUNTINGTON.  The  Government  gave  so  many  bonds  to  build 
the  road  upon  certain  conditions.  Those  conditions  were  complied 
with.  Then  those  bonds  were  ours,  to  be  used  for  a  certain  purpose; 
and  for  that  purpose  we  used  them,  and  for  no  other  purpose. 

Senator  MORGAN.  Then,  in  working  it  back,  you  built  this  road  and 
stocked  up  the  Contract  and  Finance  Company  on  the  credit  furnished 
you  by  the  Government  of  the  United  States  ? 

Mr.  HUNTINGTON.  To  a  certain  extent,  but  on  our  own  credit.  We 
had  a  great  deal  of  credit  of  our  own. 

Senator  MORGAN.  I  want  to  find  out  how  much  individual  money 
(not  realized  from  the  sale  of  stock  and  bonds  of  the  Central  Pacific 
but  coming  out  of  your  own  pockets)  you  put  in — either  one  or  all  of 
you. 

Mr.  HUNTINGTON.  We  put  in  what  you  can  not  buy  to-day  for 
$5,000,000.  That  is,  we  put  in  money;  but  beyond  that  we  put  in  time, 
night  and  day. 

Senator  MORGAN.  It  seems  to  me  you  are  trying  to  sell  it  cheaper 
than  $5,000,000,  and  to  buy  it  yourself.  Let  me  see  if  I  can  get  at  it. 
I  want  to  try,  with  all  due  patience,  without  irritation,  and  in  a  calm, 
honest,  and  proper  way,  to  find  out  what  draft  the  Central  Pacific  or 
the  Contract  and  Finance  Company  made  on  your  private  resources 
for  money  to  carry  on  its  operations  in  building  the  Central  Pacific 
road. 

Mr.  HUNTINGTON.  I  do  not  remember,  but  always  enough  to  make  a 

- 


280  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

great  success  of  the  building  of  the  road,  which  could  not  be  done  unless 
we  used  our  own  money  and  our  own  credit. 

Senator  MORGAN.  Are  you  willing  to  say  that  this  Central  Pacific 
road  was  built  on  your  private  resources,  and  out  of  your  private 
money  f 

Mr.  HUNTINGTON.  Of  course  not.  It  could  not  have  been  built  in 
that  way.  We  could  not  have  built  the  road  without  the  first-mortgage 
bonds  and  without  the  Government  bonds. 

Senator  MORGAN.  And  therefore  your  private  resources  were  not 
drawn  upon  ? 

Mr.  HUNTINGTON.  I  say  that  my  private  resources  were  drawn  upon. 

Senator  MORGAN.  To  what  extent? 

Mr.  HUNTINGTON.  I  can  not  say. 

Senator  MORGAN.  Aside  from  the  Government  credit  and  the  first- 
mortgage  bonds  of  the  company? 

Mr.  HUNTINGTON.  We  built  the  road  31  miles — a  very  expensive 
piece  of  road.  Then  we  got  to  Colfax,  54  miles — another  very  expensive 
piece  of  mountain  road — without  anything  from  the  Government;  and 
we  were  nearly  to  Cisco  before  we  got  any  bonds. 

Senator  MORGAN.  Did  you  get  the  consent  of  Congress  that  you  were 
to  have  the  bonds  of  the  Government  and  also  the  first-mortgage  bonds 
of  the  railroad  company  for  100  miles  in  advance  of  construction? 

Mr.  HUNTINGTON.  No,  not  that  I  know  of. 

Senator  MORGAN.  Did  you  not  get  an  act  of  Congress  of  that  kind? 

Mr.  HUNTINGTON.  No;  there  was  a  clause,  I  think  (the  tenth  section 
of  the  act),  by  which  we  could  draw  two- thirds  of  the  amount  of  the 
work  done;  but  we  never  did  draw  any  money  in  advance  until  we  passed 
Elcho,  near  Salt  Lake. 

Senator  MORGAN.  After  you  had  progressed  in  your  effort  to  build 
this  road,  and  progressed  with  very  marked  success,  you  got  an  act  of 
Congress  which  authorized  you  to  sell  bonds  and  to  mortgage  your 
road  in  order  to  secure  the  first  mortgage  bonds  for  100  miles  in  advance 
of  construction? 

Mr.  HUNTINGTON.  I  suppose  the  act  is  here.  My  impression  is  that 
we  had  a  right  to  draw  on  uncompleted  work  up  to  two-thirds  of  the 
work  done.  That  is  my  impression;  I  may  be  wrong. 

Senator  MORGAN.  No  only  so,  but  you  got  the  right  from  Congress 
also  to  dispense  with  the  reserve  which  was  left  in  the  treasury  of  the 
company  as  a  security  for  the  ultimate  construction  of  the  road,  and 
could  do  it  for  100  miles  in  advance  of  the  construction.  Was  that  so? 

Mr.  HUNTINGTON.  I  do  not  remember  that  that  was  in  the  act,  but 
whatever  it  was,  we  did  not  use  anything  more  than  we  were  allowed  to. 

Senator  MORGAN.  If  that  was  so,  where  was  the  occasion  or  the 
necessity  for  the  Contract  and  Finance  Company,  which  had  the  build- 
ing of  the  road,  to  borrow  on  your  private  resources  in  order  to  get 
money  ? 

Mr.  HUNTINGTON.  There  was  a  necessity  at  the  start,  and  very  likely 
from  time  to  time. 

Senator  MORGAN.  You  say  there  was  a  necessity  at  the  start,  and 
very  likely  from  time  to  time.  Well,  take  the  start.  How  much  did 
you  put  in  at  the  start  ? 

Mr.  HUNTINGTON.  We  put  in  money  from  time  to  time  whenever  it 
was  necessary. 

Senator  MORGAN.  I  am  talking  about  what  you  put  in  at  the  start. 

Mr.  HUNTINGTON.  We  put  in  whatever  the  law  required. 

Senator  MORGAN.  What  was  that! 


GOVERNMENT    DEBT   OF    THE    PACIFIC    RAILROADS.  281 

Mr.  HUNTINGTON.  We  organized  the  company  to  build  the  road  to 
the  State  line;  and  the  law  of  California  required  $1,000  a  mile  to  be 
subscribed.  We  put  in  first  10  per  cent,  and  then  put  in  money  from 
time  to  time  as  the  work  progressed. 

Senator  MORGAN.  Ten  per  cent  of  what? 

Mr.  HUNTINGTON.  Ten  per  cent  of  the  face  value  of  the  shares. 

Senator  MORGAN.  Of  the  shares  or  of  the  capital  stock! 

Mr.  HUNTINGTON.  Of  the  shares;  $1,000  a  mile  had  to  be  subscribed 
before  we  could  organize. 

The  CHAIRMAN.  What  distance  was  that? 

Mr.  HUNTINGTON.  138  miles  to  the  State  line. 

Senator  MORGAN.  That  was  a  California  requirement? 

Mr.  HUNTINGTON.  Yes. 

Senator  WOLCOTT.  Then  you  had  to  pay  $138,000  in  cash! 

Mr.  HUNTINGTON.  Yes;  whatever  the  law  required. 

Senator  MORGAN.  Have  you  got  that  money  back? 

Mr.  HUNTINGTON.  We  may  not  have  got  that  money  back;  but  we 
got  some  money  out  of  the  company  in  the  final  cleaning  up,  late  in  the 
seventies. 

Senator  MORGAN.  That  was  a  part  payment  on  the  stock? 

Mr.  HUNTINGTON.  No;  it  was  on  the  building  of  the  road. 

Senator  MORGAN.  1  am  talking  about  the  stock.  How  much  did  you 
pay  on  it? 

Mr.  HUNTINGTON.  We  paid  10  per  cent  at  first,  and  as  the  law 
required  from  time  to  time. 

Senator  MORGAN.  Was  that  a  part  payment  on  the  stock? 

Mr.  HUNTINGTON.  Of  course  it  was  a  payment  on  the  stock.  The 
law  required  payments  on  the  stock,  and  we  paid  according  to  the  law. 

Senator  MORGAN.  And  you  got  stock  for  it? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  much? 

Mr.  HUNTINGTON.  I  do  not  know.    Whatever  we  were  entitled  to. 

Senator  MORGAN.  That  was  in  the  California  company? 

Mr.  HUNTINGTON.  That  was  under  the  State  law. 

Senator  MORGAN.  Then  you  did  not  have  Central  Pacific  bonds  or 
stock  at  that  time? 

Mr.  HUNTINGTON.  No ;  we  could  not  do  any  business  until  we  sub- 
scribed $1,000  a  mile  and  paid  10  per  cent  of  the  subscription  in 
advance. 

Senator  MORGAN.  One  thousand  dollars  a  mile  from  what  point  to 
what  point? 

Mr.  HUNTINGTON.  The  distance,  as  I  remember,  is  138  miles. 

Senator  MORGAN.  And  you  paid  $1,000  a  mile  for  138  miles? 

Mr.  HUNTINGTON.  Yes;  as  I  remember. 

Senator  MORGAN.  When  you  came  to  the  Central  Pacific  organiza- 
tion, were  you  required  to  put  in  any  money? 

Mr.  HUNTINGTON.  I  have  been  talking  about  the  Central  Pacific. 

Senator  MORGAN.  I  mean  the  Central  Pacific  road,  on  this  side  of 
the  California  State  line. 

Mr.  HUNTINGTON.  I  think  so;  I  do  not  know. 

Senator  MORGAN.  You  say  that  you  paid  the  other  under  the  law  of 
California? 

Mr.  HUNTINGTON.  Yes.  When  we  passed  the  State  line  of  Cali- 
fornia we  were  in  Nevada,  and  we  paid  what  was  necessary  under  the 
law  of  Nevada. 

Senator  MORGAN.  Did  you  pay  in  any  money  for  stock  after  the  road 
left  California,  coming  east? 


282  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  do  not  know.  Whatever  the  law  required  to  be 
done  was  done. 

Senator  MORGAN.  I  do  not  think  there  is  the  least  use  in  the  world 
in  wasting  time  in  getting  your  opinion.  What  I  want  are  the  facts. 

Mr.  HUNTINGTON.  I  ain  giving  all  the  facts  I  have. 

Senator  MORGAN.  You  do  not  seem  to  have  any  recollection  of 
anything? 

Mr.  IIUNTINGTON.  I  was  not  there.  These  things  were  done  cur- 
rently from  day  to  day  by  others. 

Senator  MORGAN.  This  Commission  has  stated  its  judgment  and 
findings  upon  all  of  these  matters? 

Mr.  HUNTINGTON.  Yes;  what  they  knew  about  them. 

Senator  MORGAN.  I  have  been  trying  to  find  out  whether  you  know 
anything  contrary  to  the  statements  of  the  Commission! 

Mr.  HUNTINGTON.  I  know  all  about  the  building  of  the  road.  I  saw 
the  profiles  and  studied  them.  The  road  was  built  very  cheaply  under 
the  circumstances. 

Senator  MORGAN.  Do  you  undertake  to  say,  with  you?  meager  recol- 
lection of  facts,  that  the  findings  of  the  Commission  are  untrue? 

Mr.  HUNTINGTON.  My  recollection  of  the  building  of  the  road  and  of 
what  we  had  to  build  with  is  very  distinct,  and  I  say  that  the  Commis- 
sioners are  all  wrong  in  their  findings.  Where  they  got  their  facts  I 
do  not  know,  but  there  are  always  plenty  of  men  standing  around  the 
street  corners  in  San  Francisco  to  give  such  information. 

Senator  MORGAN.  You  say  that  your  recollection  of  the  facts  attend- 
ing the  building  of  the  road  and  of  the  resources  you  built  it  with  are 
very  distinct? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  On  that  announcement  I  expect  to  get  some  facts 
from  you.  How  long  did  it  take  you  build  the  road? 

Mr.  HUNTINGTON.  As  I  recollect,  about  seven  years. 

Senator  MORGAN.  How  many  miles  did  you  actually  build  in  those 
seven  years? 

Mr.  HUNTINGTON.  As  I  have  it,  740  miles,  or  thereabouts. 

Senator  MORGAN.  How  much  money  did  you  receive  from  bonds  to 
build  the  road? 

Mr.  HUNTINGTON.  We  received  in  round  numbers  $25,000,000  from 
the  Government  and  $25,000,000  from  the  first-mortgage  bonds.  I  do 
not  bring  in  the  Western  Pacific  road. 

Senator  MORGAN.  So  you  got  $50,000,000  in  money. 

Mr.  HUNTINGTON.  We  go  fifty  millions  in  bonds.  We  did  not  get 
par  for  the  bonds. 

Senator  MORGAN.  You  got  $50,000,000  in  money  so  far  as  the  Gov- 
ernment of  the  United  States  is  concerned? 

Mr.  HUNTINGTON.  We  got  fifty  millions  nominal  value. 

Senator  MORGAN.  The  Government  did  not  have  much  credit,  I 
suppose? 

Mr.  HUNTINGTON.  It  did  not  for  that  kind  of  bonds.  They  were 
currency  bonds,  and  gold  was  high  at  the  time  and  people  did  not  know 
what  to  do  with  those  bonds. 

Senator  MORGAN.  In  addition  to  the  bonds,  how  much  stock  did  you 
get  to  build  the  Central  Pacific  road? 

Mr.  HUNTINGTON.  There  were  sixty  millions  of  stock  out  when  we  got 
through.  I  would  say  that  the  building  of  the  road  for  the  bonds  and 
for  sixty  millions  of  stock  was  very  cheap. 

Senator  MORGAN.  You  say  that  your  recollection  is  very  distinct.  I 
want  your  recollection. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  283 

Mr.  HUNTINGTON.  I  am  giving  it  to  you. 

Senator  MORGAN.  How  much  stock  of  the  Central  Pacific  Railroad 
Company  did  you  get  in  addition  to  the  fifty  millions  of  bonds  for 
building  that  particular  part  of  the  road? 

Mr.  HUNTINGTON.  There  were  sixty  millions  of  stock  out  altogether. 
There  was  a  contract  with  Charles  Crocker  &  Co.,  who  got,  I  think, 
fifteen  millions  of  stock.  I  am  quite  sure  they  did  not  complete  their 
contract,  and  then  the  Contract  and  Finance  Company  took  it  over. 
How  much  Charles  Crocker  &  Co.  got  of  the  stock  of  the  Central 
Pacific  I  do  not  know.  My  impression  is  that  the  Contract  and  Finance 
Company  got  about  fifteen  millions  of  the  stock  for  that  work. 

Senator  MORGAN.  How  much  of  the  stock  of  the  Contract  and 
Finance  Company  did  you  get  for  that  same  work? 

Mr.  HUNTINGTON.  1  got  $1,250,000  of  the  stock  of  the  Contract  and 
Finance  Coinpanj^.  That  is,  if  I  had  one-fourth  share,  which  I  did  not 
have,  the  amount  would  have  been  $1,250,000. 

Senator  MORGAN.  And  each  of  the  other  four  had  the  same  amount1? 

Mr.  HUNTINGTON.  Yes.  We  did  not  have  any  of  the  stock  origi- 
nally. I  think  that  Mr.  Ben  Crocker  and  three  others  subscribed  to 
the  stock. 

Senator  MORGAN.  I  am  appealing  to  this  very  distinct  recollection  of 
yours. 

Mr.  HUNTINGTON.  You  are  speaking  now  of  details.  I  say  that  so 
much  stock  and  so  much  bonds  went  out  for  building  765  miles  of  road. 

Senator  WOLCOTT.  The  other  two  persons  that  you  speak  of  are 
Milliken  and  Brown  ? 

Mr.  HUNTINGTON.  Yes  5  I  thank  you,  Senator. 

Senator  MORGAN.  You  say  that  you  have  a  very  distinct  recollection 
of  the  resources  you  had  for  building  the  road? 

Mr.  HUNTINGTON.  I  know  that  fifty  millions  of  stock  went  out 
for  building  the  road  and  fifty  millions  of  bonds.  I  remember  that 
there  was  some  work  to  be  done,  and  I  saw  the  profiles  for  the  work 
over  the  mountains  to  the  Big  Bend  of  Truckee.  We  had  a  general 
reconnoissance  of  the  rest  of  the  road.  We  had  a  close  estimate,  and 
we  knew  that  we  had  so  much  to  build  the  road  with.  I  said  that, 
with  great  economy,  we  could  do  it.  But  gold  went  up,  and  many 
things  went  up  in  cost;  but  still,  with  great  economy  and  hard  work, 
we  built  the  road. 

Senator  MORGAN.  And  with  good  pay? 

Mr.  HUNTINGTON.  Not  very  good.  I  would  not  do  it  over  again  for 
twice  that  pay.  I  remember  very  distinctly  what  we  had  to  build  the 
road  with,  but  just  how  that  was  divided  and  subdivided  I  do  not  know. 

Senator  MORGAN.  Your  recollection  is  a  general  summary  and  does 
not  relate  to  facts. 

Mr.  HUNTINGTON.  These  are  the  main  facts.  These  are  factors  that 
we  had  to  deal  with. 

Senator  MORGAN.  But  I  want  to  know  the  facts  which  make  up  this 
detailed  statement,  so  that  I  can  see  whether  your  recollection  is  cor- 
rect or  not. 

Mr.  HUNTINGTON.  I  would  like  you  to  know,  Senator,  all  that  I 
know. 

Senator  MORGAN.  I  think  that  I  have  got  all  that  you  know.  The 
commissioners  found  out  a  great  many  things  about  the  building  of  the 
road,  and  I  want  to  know  whether  they  differ  with  you  in  their  conclu- 
sions, or  whether  you  feel  authorized  to  contradict  what  they  have 
found. 


284  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  contradict  the  report  of  the  commission — pretty 
much  all  of  it  and  its  conclusions. 

Senator  MORGAN.  Do  you  contradict  the  commission  on  items  which 
you  confess  you  can  not  state  yourself? 

Mr.  HUNTINGDON.  I  contradict  the  commission  on  this  fact.  That  the 
work  was  a  great  work  to  do,  for  what  we  had  to  do  it  with;  and  when 
they  say  that  the  work  could  be  done  for  $36,000,000,  I  say  that  the 
commissioners  did  not  know  anything  about  it. 

Senator  MORGAN.  The  commissioners  have  had  an  opportunity  to 
be  instructed  and  informed  by  your  testimony,  and  by  the  testimony  of 
Mr.  Stanford  and  others,  given  at  a  much  earlier  date  than  this,  and 
when  the  facts  were  fresher  in  your  memory  than  they  can  possibly  be 
now.  You  could  have  made  a  statement  of  facts  on  which  they  could 
base  their  judgment,  and  I  think  they  did  base  it  upon  your  statement. 

Mr.  HUNTINGTON.  The  commissioners  say  that  the  road  from  Bonne- 
ville  Table  to  the  summit  cost  $40,000  a  mile.  Here  is  what  General 
Dodge,  who  is  an  able  and  intelligent  engineer,  says  in  regard  to  that 
question.  He  testified  that  it  cost  $87,000  in  cash  per  mile  between 
Bonneville  Table  and  the  summit,  which  would  equal  $4,132,500  for  the 
whole  distance.  General  Dodge  was  there.  He  was  the  engineer  and 
knew  all  about  it.  The  commissioners  have  put  the  price  at  about 
one-half. 

Senator  MORGAN.  Where  is  General  Dodge  now  "I 

Mr.  HUNTINGTON.  I  got  this  statement  from  New  York.  It  is  an 
extract  from  his  testimony  [presenting  a  telegram]. 

Senator  MORGAN.  Is  this  telegram  from  him? 

Mr.  HUNTINGTON.  No;  it  is  from  Charles  H.  Tweed.  I  told  Mr. 
Miles  to  ask  the  question  this  morning  and  this  information  is  got,  I 
presume,  from  General  Dodge's  testimony. 

Senator  MORGAN.  What  testimony  are  you  talking  about? 

Mr.  HUNTINGTON.  General  Dodge's  testimony  before  the  Wilson 
committee  as  to  the  cost  of  this  piece  of  road.  The  telegram  reads : 
"  Your  telegram  received ;  $87,000  cash  per  mile,  which  would  equal 
$4,132,000.  Charles  H.  Tweed." 

Senator  MORGAN.  Mr.  Tweed  is  your  lawyer? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  sent  Mr.  Miles  to  him? 

Mr.  HUNTINGTON.  No ;  I  told  Mr.  Miles  to  ask  him  the  question  over 
the  wires. 

Senator  MORGAN.  Who  is  Mr.  Miles — your  clerk"? 

Mr.  HUNTINGTON.  Yes;  my  secretary. 

Senator  MORGAN.  And  so  you  told  your  secretary  to  ask,  by  telegraph, 
what  Gen  era!  Dodge  Lad  sworn  to  in  a  deposition  given  before  the  Wil- 
son committee? 

Mr.  HUNTINGTON.  Yes.  Eighty-seven  thousand  dollars  a  mile  from 
Bonneville  Table  to  the  summit.  There  are  no  structures  on  that  piece 
of  road,  except  one  bridge  over  Bear  River. 

Senator  MORGAN.  That  is  part  of  the  mountain  road,  is  it? 

Mr.  HUNTINGTON.  No ;  it  is  from  Ogden  to  Promontory  Point. 

Senator  MORGAN.  What  is  the  length  of  that  piece  of  road? 

Mr.  HUNTINGTON.  Forty-eight  or  fifty  miles. 

Senator  MORGAN.  How  much  a  mile  in  bonds  did  you  get  from  the 
Government  for  that  road? 

Mr.  HUNTINGTON.  Thirty-two  thousand  dollars. 

Senator  MORGAN.  And  how  much  in  first-mortgage  bonds? 

Mr.  HUNTINGTON.  The  same. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  285 

Senator  MORGAN.  That  is  $64,000  a  mile. 

Mr.  HUNTINGDON.  Yes;  and  I  understand  the  road  was  not  complete 
at  the  time  we  got  it. 

Senator  MORGAN.  Why  was  that  part  of  the  road  so  difficult  to 
build? 

Mr.  HUNTINGTON.  I  do  not  know.  Things  were  expensive.  There 
was  a  long  haul,  and  we  had  to  pay  $10  a  day  for  teams — for  the  hire 
of  horses  and  men. 

Senator  MORGAN.  Its  expense  was  not  on  account  of  topographical 
difficulties'? 

Mr.  HUNTINGTON.  No;  but  everything  out  there  was  expensive. 

Senator  MORGAN.  Did  you  build  the  road  from  Promontory  Point 
west  to  any  extent? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  build  it  clear  through! 

Mr.  HUNTINGTON.  Yes;  we  did  not  take  that  part  of  the  road  until 
we  connected  at  Promontory  Point. 

Senator  MORGAN.  You  mean  that  you  built  the  road  from  Bonneville 
Table  eastward  to  Ogden? 

Mr.  HUNTINGTON.  No;  we  bought  it  from  the  Union  Pacific  Com- 
pany. 

Senator  MORGAN.  Then,  what  are  we  inquiring  about? 

Mr.  HUNTINGTON.  It  is  part  of  the  report  of  the  commissioners  that 
that  road  only  cost  so  much;  and  the  statement  of  the  commissioners 
is  quite  in  the  face  of  General  Dodge's  testimony,  who  said  that  it  cost 
the  Union  Pacific  Company  so  much;  and  no  rolling  stock  went  witli  it. 

Senator  MORGAN.  Then,  the  Union  Pacific  Company  built  that  piece 
of  road? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  wanted  to  buy  it  and  did  buy  it? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  say  that  the  Commissioners  have  under- 
stated the  amount  of  money  that  you  paid  for  it? 

Mr.  HUNTINGTON.  They  have  understated  the  cost  of  the  road. 

Senator  MORGAN.  How  much  did  you  pay  for  it? 

Mr.  HUNTINGTON.  I  do  not  recollect. 

Senator  MORGAN.  Did  you  pay  anything  more  for  it  than  the  Com- 
missioners have  stated  ? 

Mr.  HUNTINGTON.  I  think  we  paid  $4,000,000  for  it. 

Senator  MORGAN.  Did  you  pay  any  more  than  the  Commissioners 
stated  ? 

Mr.  HUNTINGTON.  Yes;  I  know  it  was  more  than  that. 

Senator  MORGAN.  You  do  not  mean  that  the  building  of  this  40  miles 
of  road  cost  you  over  $4,000,000? 

Mr.  HUNTINGTON.  No;  I  mean  that  it  cost  the  Union  Pacific  Com- 
pany that  much. 

Senator  MORGAN.  But  you  did  not  lose  any  money  by  buying  the 
road  cheaper  than  the  Union  Pacific  Company  built  it  for? 

Mr.  HUNTINGTON.  No;  but  this  statement  of  General  Dodge's  shows 
the  cost  of  the  road. 

Senator  MORGAN.  And  the  Union  Pacific  Company  sold  it  to  you  for 
less  than  it  cost  the  company  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Which  shows  your  skill  in  buying? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Why  did  you  buy  that  piece  of  road? 


286  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  Because  we  did  not  want  to  stop  on  the  top  of 
Promontory  Mountain.  We  wanted  to  come  to  Ogden,  and  we  should 
have  built  the  road  to  Ogden  if  the  Union  Pacific  Company  had  not 
sold  us  this  piece  of  road. 

Senator  MORGAN.  Would  you  have  skipped  the  Union  Pacific? 

Mr.  HUNTINGTON.  No  5  but  we  would  have  gone  alongside  of  it. 

Senator  MORGAN.  You  thought  you  had  a  right  to  build  a  road  par- 
allel to  theirs? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  that  was  your  view  of  it? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  You  were  building  your  road  in  a  great  hurry? 

Mr.  HUNTINGTON.  Yes;  we  wanted  to  get  into  Salt  Lake  Valley  to 
share  that  business,  which  was  supposed  to  be  much  greater  than  it 
actually  was. 

Senator  MORGAN.  You  do  not  mean  to  say  that  the  Union  Pacific 
Railroad  Company  paid  $10  a  day  for  teams  in  building  this  piece  of 
road? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  Did  you  ever  pay  so  much  for  teams? 

Mr.  HUNTINGTON.  I  am  very  certain  that  we  did. 

Senator  MORGAN.  How  much  time  did  you  save  in  building  that  road 
to  a  through  connection  over  the  time  within  which  you  were  allowed 
by  act  of  Congress  to  build  it? 

Mr.  HUNTINGTON.  As  I  recollect,  seven  years  and  three  months. 

Senator  MORGAN.  You  saved  seven  years  and  three  months? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  You  must  have  been  in  a  great  hurry  to  build  it? 

Mr.  HUNTINGTON.  The  Union  Pacific  was  trying  to  drive  us  out  of 
Salt  Lake  Valley,  and  we  thought  there  was  great  tonnage  there. 

Senator  MORGAN.  And  the  Union  Pacific  Company  did  get  to  Salt 
Lake  Valley  before  you  did? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  had  to  buy  out  the  Union  Pacific? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  So  that  it  was  a  race  of  diligence  between  the  two 
companies  as  to  which  would  get  first  to  this  Salt  Lake  Valley  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  If  you  had  taken  that  seven  years  to  build  the 
road,  would  you  not  have  saved  much  money? 

Mr.  HUNTINGTON.  Yes;  I  think  so. 

Senator  MORGAN.  How  much  ? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Then,  for  the  advantage  of  the  four  men  who 
owned  the  Central  Pacific,  you  rushed  things  and  had  to  pay  enormous 
amounts  for  wagons  and  other  transportation  and  materials,  which 
amounts  you  might  have  saved  if  you  had  been  a  little  more  temperate 
and  had  not  been  so  greedy  in  regard  to  the  mileage  of  the  road  which 
you  wanted  to  control? 

Mr.  HUNTINGTON.  That  is  rather  a  partisan  way  of  putting  it.  We 
wanted  to  get  into  Salt  Lake  Valley,  and  we  did  get  there.  Everybody 
was  just  hurrying  us  on.  There  wasn't  a  man,  woman,  or  child  there 
who  didn't  want  to  come  back  to  the  East  to  visit  the  old  folks  at  home. 

Senator  MORGAN.  We  have  had  "the  old  folks  at  home"  several 
times  before. 

Mr.  HUNTINGTON.  It  is  the  second  time  that  I  have  stated  it. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  287 

Senator  MORGAN.  No;  I  think  it  is  the  fifth  time.  Leaving  out lt  the 
old  folks  at  home,"  who  were  so  anxious  to  get  out  there  and  whom 
you  were  so  anxious  to  accommodate,  and  getting  back  to  the  question 
of  your  anxiety  to  get  into  Salt  Lake  Valley,  you  wanted  as  much 
mileage  as  possible  between  the  Pacific  Ocean  and  the  East  under  the 
control  of  the  Central  Pacific  Eailroad  Company  ? 

Mr.  HUNTINGTON.  I  do  not  recollect  that  that  was  wanted,  but  I 
should  think  it  would  have  been. 

Senator  MORGAN.  What  did  you  want  if  you  did  not  expect  it  to  be 
a  large,  profitable  business? 

Mr.  HUNTINGTON.  Of  course,  where  there  are  two  companies  build- 
ing roads  on  a  joint  line,  each  of  them  wants  to  have  as  much  of  the 
road  as  it  can. 

Senator  MORGAN.  Then  you  were  not  working  for  money,  but  work- 
ing for  glory? 

Mr.  HUNTINGTON.  I  do  not  think  we  were  working  for  money,  really. 

Senator  MORGAN.  But  you  managed  to  get  it? 

Mr.  HUNTINGTON.  No;  I  do  not  think  we  got  pay  sufficient  for  what 
we  did. 

Senator  MORGAN.  I  know  you  do  not  think  so.  With  all  these 
stories  about  mileage  and  about  your  ambitious  scheme  to  extend  the 
road,  you  made  no  mistake  about  the  wisdom  or  the  policy  of  trying  to 
extend  your  road  as  rapidly  and  as  far  as  you  could  do  it? 

Mr.  HUNTINGT(  >N.  No.  As  an  American  citizen,  I  think  it  was  a  good 
thing  to  hurry  up  the  road,  and  it  was  an  economy  to  the  Government. 
The  Government  was  paying  a  great  many  millions  of  dollars  to  police 
that  country,  which  we  did  as  soon  as  we  covered  the  ground  with  our 
road. 

Senator  MORGAN.  Then,  in  doing  this  work  of  patriotism,  you  were 
not  working  against  the  British,  but  against  other  American  citizens 
who  were  building  the  Union  Pacific  road? 

Mr.  HUNTINGTON.  I  was  figuring  upon  the  general  results. 

Senator  MORGAN.  The  Union  Pacific  Company  had  as  good  a  right 
to  the  field  as  you  had  ? 

Mr.  HUNTINGTON.  Certainly. 

Senator  MORGAN.  So  that  it  was  American  citizens  against  American 
citizens  ? 

Mr.  HUNTINGTON.  You  misunderstand  me.  I  say  that,  as  American 
citizens,  better  care  was  taken  of  that  country  than  when  it  was  cost- 
ing the  Government  seven  millions  a  year  to  police  it. 

Senator  MORGAN.  You  still  seem  to  want  to  take  good  care  of  it  by 
owning  this  road. 

Mr.  HUNTINGTON.  I  think  that  what  we  have  done  was  a  good  reason 
for  our  having  it. 

Senator  MORGAN.  Getting  back  to  "the  old  folks  at  home,"  you 
found  that  for  the  first  ten  years  after  you  built  this  long  line  from 
Bonueville  Table  to  the  Pacific  Ocean  the  road  paid  well? 

Mr.  HUNTINGTON.  Yes;  it  paid  very  well  until  the  Northern  Pacific 
and  the  Atchison  and  Sante  Fe  roads  cut  in. 

Senator  MORGAN.  The  first  ten  years^  of  its  operation  the  Central 
Pacific  Company  paid  well? 

Mr.  HUNTINGTON.  Yes ;  it  paid  very  well. 

Senator  MORGAN.  Did  it  pay  well  for  the  first  fourteen  years? 

Mr.  HUNTINGTON.  I  do  not  know  when  these  other  two  roads  really 
got  into  operation.  When  they  did  get  into  operation  freights  went 
down,  and  tonnage  went  down,  and  it  was  very  rough. 


288  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Have  you  examined  the  Commission's  report  on 
that  subject  as  to  the  income  of  the  competing  roads,  and  as  to  the 
influence  of  the  Central  Pacific  on  them? 

Mr.  HUNTINGTON.  I  think  I  looked  it  over. 

Senator  MORGAN.  Have  you  any  fault  to  find  with  the  statements  of 
the  Commission  on  that  subject? 

Mr.  HUNTINGTON.  I  do  not  recollect  now  just  what  those  statements 
were. 

Senator  MORGAN.  They  show  a  very  large  profit  in  the  operation  of 
the  Central  Pacific  road,  beginning  with  the  first  year,  when  they  were 
making  perhaps  14  per  cent. 

Mr.  HUNTINGTON.  I  do  not  think  it  was  as  much  as  that,  but  the 
road  did  pay  very  well. 

Senator  MORGAN.  As  much  as  12  per  cent? 

Mr.  HUNTINGTON.  I  do  not  think  that  there  was  over  10  per  cent  at 
any  time. 

Senator  MORGAN.  For  the  first  ten  or  fourteen  years,  or  for  whatever 
time  they  have  stated,  large  dividends  were  paid,  so  that  you  found  the 
road  immensely  profitable  during  that  time? 

Mr.  HUNTINGTON.  I  do  not  know  that  I  would  exactly  use  that 
language;  but  the  road  did  well. 

Senator  MORGAN.  Do  you  know  any  long  road  in  the  United  States 
that  has  paid  its  stockholders  more  than  10  per  cent  dividends? 

Mr.  HUNTINGTON.  No;  I  am  not  very  familiar  with  the  dividends 
paid  by  other  companies. 

Senator  MORGAN.  You  have  given  that  matter  general  observation, 
I  suppose? 

Mr.  HUNTINGTON.  Yes;  but  I  keep  myself  generally  confined  to 
Western  roads. 

Senator  MORGAN.  How  could  you  find  out  how  a  company  was  doing 
unless  you  had  an  opportunity  of  comparing  it  with  other  companies? 

Mr.  HUNTINGTON.  I  know  that  a  10  per  cent  dividend  is  pretty  good, 
anyway.  We  were  glad  when  the  road  began  to  pay  dividends,  because 
then  the  stock  went  up,  and  we  sold  it  in  order  to  pay  our  debts. 

Senator  MORGAN.  Did  you  pay  your  debts  out  of  the  dividends  you 
received  ? 

Mr.  HUNTINGTON.  JSTo;  I  think  we  sold  the  shares  and  paid  our  debts 
out  of  what  we  received  from  them. 

Senator  MORGAN.  You  got  dividends  over  and  above  the  debts  that 
were  paid.  Could  there  have  been  any  dividends  honestly  paid  unless 
the  honest  debts  and  charges  were  paid  before  the  dividend  was 
declared?  Would  it  not  have  been  a  crime,  moral  and  statutory,  to 
have  paid  dividends  on  that  road  unless  you  had  first  satisfied  the  fixed 
charges  and  the  current  debts? 

Mr.  HUNTINGTON.  I  think  it  would  not  have  been  right.  I  do  not 
tliiuk  the  company  declared  any  dividends  when  the  road  was  in  debt. 

Senator  MORGAN.  You  do  not  think  there  were  any  dividends 
paid  except  after  the  payment  of  all  debts  and  fixed  charges  of  the 
company  ? 

Mr.  HUNTINGTON.  No;  I  said  nothing  of  the  kind;  you  misunder- 
stand me.  The  Contract  and  Finance  Company  was  owing  the  money. 
I  do  not  think  that  the  Central  Pacific  Company  was  owing  much,  if 
anything. 

Senator  MORGAN.  That  is  a  side  show.  I  am  not  talking  about  the 
Contract  and  Finance  Company,  I  want  to  know  about  the  Central 
Pacific  Company.  What  was  it  that  prevented  you  from  funding,  in 


GOVERNMENT    DEBT    OP    THE    PACIFIC    RAILROADS.  28[> 

good  stocks  or  securities,  these  10  per  cent  dividends  paid  for  ten  years 
(ten  times  ten  equal  to  one  hundred)  so  as  to  pay  off  the  first  and  sec- 
ond mortgage  bonds. 

Mr.  HUNTINGTON.  It  might  have  been  done,  but  the  only  reason  for 
doing  it  would  have  been  that  it  was  a  novelty;  no  other  reason  in  the 
world  for  it.  It  never  was  done.  We  commenced  selling  shares  when 
the  prices  went  up,  and  we  paid  the  debts  of  the  Contract  and  Finance 
Company,  which  owned  those  shares. 

Senator  MORGAN.  You  had  ten  years  of  10  per  cent  dividends. 

Mr.  HITNTINGTON.  We  did  not  have  any  such  thing.  I  do  not 
believe  it. 

Senator  MORGAN.  You  said  so. 

Mr.  HUNTINGTON.  I  said  that  I  think  we  had  dividends  as  high  as 
10  per  cent  one  year. 

Senator  MORGAN.  Did  you  not  state  that  the  average  dividend  was 
10  per  cent? 

Mr.  HUNTINGTON.  No.  Excuse  me,  Senator,  I  did  not  state  any 
average. 

Senator  MORGAN.  What  was  it? 

Mr.  HUNTINGTON.  I  say  that  the  company  paid  as  high  as  10  per 
cent  in  dividends. 

Senator  MORGAN.  What  was  the  average  during  the  ten  years? 

Mr.  HUNTINGTON.  I  can  not  say. 

Senator  MORGAN.  If  you  can  not  say,  why  do  you  contradict  the 
commissioners'? 

Mr.  HUNTINGTON.  I  do  not  think  that  the  commissioners  say  that 
the  Central  Pacific  paid  10  per  cent  dividends  for  ten  years. 

Senator  MORGAN.  Well,  if  it  was  only  1  per  cent,  or  5  per  cent,  or  8 
per  cent,  why  did  you  not  put  whatever  it  was  into  a  sinking  fund  to 
meet  the  debt  which  you  knew  you  owed  to  the  United  States  and  to 
the  first  mortgage  bondholders,  so  as  to  extinguish  that  debt? 

Mr.  HUNTINGTON.  Because  these  things  are  never  done.  The  stock 
was  entitled  to  its  dividends  when  the  obligations  were  met  according 
to  law.  In  1878  we  passed  a  resolution  for  a  sinking  fund  for  the  Gov- 
ernment, which  sinking  fund  would  have  nearly  wiped  out  the  debt, 
but  Senator  Thurman  came  here  with  a  bill  of  his  own.  I  said  that  we 
would  go  on  and  keep  our  own  sinking  fund  and  pay  the  Government 
debt,  but  Senator  Thurman  said  no;  that  the  Government  would  keep 
the  sinking  fund;  and  the  result  has  been  that  that  sinking  fund,  kept 
by  the  Government,  did  not  get  a  new  dollar  for  an  old  one  on  its 
investment.  It  paid  as  much  as  135  for  6  per  cent  bonds,  and  I  think 
it  hardly  got  a  new  dollar  for  an  old  one.  I  might  not  have  paid  off 
the  whole  of  the  debt  with  the  sinking  fund  that  we  proposed,  but  I 
would  have  paid  enough  ol  ic  so  that  we  could  have  easily  handled  it 
when  it  became  due. 

Senator  MORGAN.  I  have  sat  here  and  have  had  you  put  that  state- 
ment on  record  four  or  five  different  times  as  an  excuse  for  your  not 
making  a  sinking  fund  out  of  your  dividends. 

Mr.  HUNTINGTON.  As  soon  as  we  could  see  our  way  clear  to  pay  our 
debts  we  commenced  selling  Central  Pacific  stock  and  paid  our  debts. 

Senator  MORGAN.  The  stockholders  got  their  dividends? 

Mr.  HUNTINGTON.  They  were  entitled  to  them. 

Senator  MORGAN.  It  is  impossible  for  me  to  get  on  the  record  answers 
to  my  questions  because  of  your  extreme  anxiety  to  escape  answering 
them.  Did  the  Thurman  controversy,  which  occurred  twelve  or  four- 
teen years  later,  prevent  you,  in  the  beginning,  when  you  got  10  per  cent 
PR 19 


I 


290  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

dividends  in  one  year  (perhaps  less  in  another  year),  from  organizing 
a  sinking  fund?  I  mean  during  the  time  that  elapsed  before  Thurman 
got  into  it? 

Mr.  HUNTINGTON.  I  do  not  know  when  Thurman  got  into  it.  I 
think  his  bill  was  passed  in  1878.  It  was  before  that  that  I  had  a  reso- 
lution passed  in  the  board  for  a  sinking  fun  I. 

Senator  MORGAN.  Did  you  create  a  sinking  fund? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Why? 

Mr.  HUNTINGTON.  Because  Senator  Thurman  took  it  up  and  said 
that  he  was  going  to  create  a  sinking  fund  lor  the  Government. 

Senator  MORGAN.  And  when  you  found  that  the  Government  was 
going  to  change  the  law,  and  to  require  payment  on  the  net  income  of 
the  company,  without  regard  to  dividends,  then  you  passed  a  resolu- 
tion to  create  a  sinking  fund? 

Mr.  HUNTINGTON.  Not  at  all.  It  was  done  before  Thurman's  bill 
was  passed. 

Senator  MORGAN.  How  long  before? 

Mr.  HUNTINGTON.  Not  ^nany  months.  It  was  done  just  at  the  time 
that  we  thought  it  was  well  to  do  something  in  that  way. 

Senator  MORGAN.  Because  Congress  was  getting  after  you? 

Mr.  HUNTINGTON.  No;  we  were  complying  with  every  requirement 
of  law. 

Senator  MORGAN.  You  had  that  interval  of  time  during  three  or  four 
months  which  antedated  the  Thurman  movement,  and  you  did  not  pro- 
vide for  a  sinking  fund1? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  You  paid  the  dividends? 

Mr.  HUNTINGTON.  Whatever  dividends  were  coming  'to  us  we  took; 
but  we  violated  no  law,  moral  or  statutory. 

Senator  MORGAN.  Were  not  dividends  enough  paid  on  that  stock  to 
have  constituted  a  sinking  fund,  the  principal  of  which  would  have 
been  equal  to  at  least  two-thirds  of  the  first-mortgage  debt  and  of  the 
Government  debt? 

Mr.  HUNTINGTON.  No;  I  think  not. 

Senator  MORGAN.  How  much  would  it  have  been  ? 

Mr.  HUNTINGTON.  I  do  not  know  how  much.  If  we  put  in  two  or 
three  other  roads,  I  suppose  it  would  be  less.  We  followed  the  statutes. 

Senator  MORGAN.  I  do  not  think  I  comprehend  you. 

Mr.  HUNTINGTON.  If  we  had  called  in  the  first-mortgage  bonds  before 
they  were  due,  we  would  have  had  to  pay  a  large  premium  on  them.  I 
think  that  the  stockholders  were  entitled  to  all  the  dividends  they  got. 

Senator  MORGAN.  Did  you  receive  any  part  of  the  dividends  in 
money  yourself? 

Mr.  HUNTINGTON.  In  the  last  cleaning  up,  I  did  receive  some  money. 

Senator  MORGAN.  In  the  current  business  did  you  receive  any  divi- 
dends in  money  in  your  own  hands? 

Mr.  HUNTINGTON.  Not  directly  from  the  Central  Pacific.  I  had  prob- 
ably some  shares  of  the  Central  Pacific,  but  not  a  great  many. 

Senator  MORGAN.  Did  you,  as  an  individual  man,  receive  any  money 
in  your  own  hands,  or  the  representative  of  money,  for  these  dividends 
or  any  part  thereof? 

Mr.  HUNTINGTON.  I  should  think  I  did;  I  am  quite  sure  I  did. 

Senator  MORGAN.  How  much  do  you  think  you  did  receive! 

Mr.  HUNTINGTON.  Not  a  great  deal. 

Senator  MORGAN.  How  much? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  291 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  And  when? 

Mr.  HUNTINGTON.  When  they  were  paid  to  others. 

Senator  MORGAN.  Have  you  no  recollection  of  having  received  any 
particular  sum  of  money  as  dividends? 

Mr.  HUNTINGTON.  I  do  not  recollect  any  definite  sum,  but  I  have  no 
doubt  that  I  did  receive  dividends  at  various  times  when  dividends 
were  paid. 

Senator  MORGAN.  When  you  are  traveling  from  New  York  to  San 
Francisco  or  from  San  Francisco  to  New  York,  do  you  not  know  how 
much  your  hotel  bills  are  and  whether  you  have  paid  them1? 

Mr.  HUNTINGTON.  Probably  I  would  not  know  a  year  afterwards. 

Senator  MORGAN.  Have  you  not  been  pretty  diligent  of  late  in  look- 
ing up  books  and  things  to  see  the  state  of  your  accounts? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  And  yet  you  knew  that  you  were  coming  before 
this  committee  to  ask  Congress  to  put  this  railroad  in  your  possession  ? 

Mr.  HUNTINGTON.  I  am  not  reviewing  my  life's  business.  I  am  sat- 
isfied with  it.  We  have  done,  in  every  case,  what  the  law  required. 

Senator  MORGAN.  I  would  hate  to  assert  that,  if  I  were  in  your  place. 

Mr.  HUNTINGTON.  I  do  assert  it  most  boldly — that  we  have  done 
just  what  the  law  required.  If  you  say  that  we  have  not,  and  if  you 
will  tell  me  wherein  we  have  not,  I  will  try  to  explain. 

Senator  MORGAN.  You  have  got  the  fullest  liberty  in  the  world  to 
explain  everything,  but  I  beg  leave  to  say  that  you  are  not  improving 
the  value  of  your  statements  when  you  decline  to  give  categorical 
answers  to  honest  questions.  If  you  would  do  so  you  would  relieve 
the  case  very  quickly. 

Mr.  HUNTINGTON.  When  Senator  Morgan  asks  me  to  answer  ques- 
tions about  things  that  happened  thirty-five  years  ago,  I  can  only 
answer  in  a  general  way.  If  I  could  answer  yes  or  no,  I  would  do  so. 

Senator  MORGAN.  After  this  discourse,  argumentation,  and  general 
wandering  over  the  field,  can  you  now  state  that,  at  any  time,  you 
received  into  your  own  hands  any  money  that  came  from  the  dividends 
of  this  Central  Pacific  Eailroad  stock? 

Mr.  HUNTINGTON.  I  will  say,  as  I  have  said  before,  that  I  think  I 
have.  I  am  quite  sure  I  have. 

Senator  MORGAN.  You  can  not  state  it  as  a  fact? 

Mr.  HUNTINGTON.  I  know  it  just  as  well  as  I  know  anything.  I  am 
satisfied  that  I  received  dividends,  but  I  can  not  say  how  much. 

Senator  MORGAN.  If  you  know  it  as  well  as  you  know  anything,  can 
you  not  state  whether  you  received  dividends  arid  how  much? 

Mr.  HUNTINGTON.  No;  I  do  not  know  anybody  who  could  tell 
exactly  what  passed  thirty  years  ago. 

Senator  MORGAN.  Awhile  ago  you  said  that  you  could  tell  exactly 
what  it  cost  to  build  the  railroad  and  the  resources  that  you  had  to 
build  it  with. 

Mr.  HUNTINGTON.  I  do  not  know  that  I  used  the  word  "  exactly." 
I  said  I  could  tell  that  it  was  a  great  work  and  could  tell  what  we  had 
to  build  it  with.  It  had  to  be  done  with  great  economy. 

Senator  MORGAN.  And  now  you  say  you  know  that  you  have  received 
dividends  from  the  Central  Pacific  Company  in  money,  into  your  own 
hands,  and  that  you  can  not  tell  where  or  how  much  you  received  at 
any  time? 

Mr.  HUNTINGTON.  Quite  true. 

Senator  MORGAN.  Did  you  receive  any  large  sums! 


292  GOVERNMENT    DEBT   OF    THE    PACIFIC    KAILROADS. 

Mr.  HUNTINGTON.  I  do  not  think  I  did. 

Senator  MORGAN.  Did  you  receive  all  that  was  coining  to  you? 

Mr.  HUNTING-TON.  I  did. 

Senator  MORGAN.  How  much  was  coming  to  you? 

Mr.  HUNTINGTON.  I  can  not  tell. 

Senator  MORGAN.  How  much  stock  of  the  Central  Pacific  did  you 
hold? 

Mr.  HUNTINGTON.  I  do  not  know.  It  was  through  the  Contract  and 
Finance  Company  that  we  got  our  money. 

Senator  MORGAN.  The  Contract  and  Finance  Company  seems  differ- 
ent from  the  Central  Pacific  Company.  I  admit  that  it  is  only  a  ques- 
tion of  bookkeeping;  but,  at  the  same  time,  there  is  a  line  of  separation 
in  the  bookkeeping  between  the  two  companies.  What  do  you  mean, 
when  you  say  the  stock  of  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  I  say  that  the  dividends  that  I  received  from  the 
Central  Pacific  Company  were  received  through  the  Contract  and 
Finance  Company.  Not  all  of  them.  I  received  some  myself.  I  had 
some  shares  of  the  Central  Pacific  and  sold  them  just  as  soon  as  I 
needed  the  money. 

Senator  MORGAN.  Then  the  Contract  and  Finance  Company  were 
the  holders  of  a  large  number  of  shares  of  the  Central  Pacific  Railroad 
Company,  and  received  dividends  on  those  shares'? 

Mr.  HUNTINGTON.  Yes;  when  the  Contract  and  Finance  Company 
owned  them. 

Senator  MORGAN.  What  did  that  company  do  with  the  dividends? 

Mr.  HUNTINGTON.  It  paid  them  out  to  the  shareholders. 

Senator  MORGAN.  From  time  to  time  as  it  received  them? 

Mr.  HUNTINGTON.  I  presume  so;  or  it  may  have  partly  used  them 
in  paying  some  of  its  debts. 

Senator  MORGAN.  Do  you  know  that  the  Contract  and  Finance  Com- 
pany did  pay  these  dividends  to  the  shareholders? 

Mr.  HUNTINGTON.  It  paid  some,  I  know;  perhaps  all. 

Senator  MORGAN.  What  did  the  Contract  and  Finance  Company  do 
with  the  dividends  it  received  from  the  Central  Pacific  Company? 

Mr.  HUNTINGTON.  It  used  them  to  pay  its  debts,  if  it  did  not  give 
them  to  the  shareholders. 

Senator  MORGAN.  Did  it  give  the  dividends  to  the  shareholders? 

Mr.  HUNTINGTON.  I  think  that  it  both  paid  its  debts  and  gave  money 
to  the  stockholders. 

Senator  MORGAN.  How  much  did  the  Contract  and  Finance  Company 
pay  to  you  in  dividends? 

Mr.  HUNTINGTON.  I  do  not  recollect. 

Senator  MORGAN.  You  held  stock  of  the  Central  Pacific  at  that  time 
as  an  individual  stockholder? 

Mr.  HUNTINGTON.  Oh,  yes. 

Senator  MORGAN.  Without  being  able  to  state  how  much  it  was  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  the  Contract  and  Finance  Company,  in  which 
you  held  stock,  also  held  the  stock  of  the  Central  Pacific  Company  ? 

Mr.  HUNTINGTON.  Quite  right. 

Senator  MORGAN.  And  you  and  Crocker  and  Hopkins  and  Stanford 
owned  the  Central  Pacific  Company  and  the  Contract  and  Finance 
Company  ? 

Mr.  HUNTINGTON.  Not  all. 

Senator  MORGAN.  Nearly  all. 

Mr.  HUNTINGTON.  I  think  myself  that  that  is  substantially  so. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  293 

Senator  MORGAN.  You  owned  all  but  a  slight  color. 

Mr.  HUNTINGTON.  We  owned  the  majority  of  the  stock. 

Senator  MORGAN.  There  was  just  a  trace  left  in  the  hands  of  other 
people.  In  this  accidental  combination  of  circumstances  the  money 
which  was  paid  on  these  dividends  went  to  the  Contract  and  Finance 
Company  and  was  used  in  its  business.  Did  that  Contract  and  Finance 
Company  take  any  other  contract  except  for  the  building  of  the  Central 
Pacific  road  ? 

Mr.  HUNTINGTON.  I  think  it  did. 

Senator  MORGAN.  What  other  contracts? 

Mr.  HUNTINGTON.  I  do  not  know.  We  have  been  always  building 
roads,  and  we  have  generally  kept  one  company  in  operation  until  some 
member  died  and  the  company  was  closed  up.  When  Mr.  Colton  died 
and  when  E.  B.  Crocker  died  the  company  was  changed. 

Senator  MORGAN.  I  understand  you  to  mean  that  you  are  not  able 
to  recollect  the  precise  history  of  all  these  investments  and  reinvest- 
ments because  you  had  so  many  companies  under  your  control  (I  mean 
you  four),  and  that  you  are  unable  to  tell  what  particular  company  you 
were  employing  at  a  particular  time  to  do  a  particular  job  of  work? 

Mr.  HUNTINGTON.  Perhaps  that  is  stating  it  a  little  partisanly;  but 
in  the  main  it  is  correct,  I  should  say.  There  were,  however,  other 
interests  than  those  four. 

Senator  MORGAN.  I  will  take  the  partisanship  and  put  the  truth 
along  with  it.  Please  tell  us  what  roads  you  did  build  with  these  various 
instrumentalities  or  corporations. 

Mr.  HUNTINGTON.  I  think  we  built  the  Oregon  branch  from  Bose- 
ville  to  the  State  line.  1  do  not  know  that  we  built  it  all  the  way;  that 
belonged  to  another  railroad  company.  Originally  we  had  no  interest 
in  it.  The  other  company  started  it,  and  could  not  get  money  to  go  on 
with  it,  and  we  took  it.  We  built  the  road  from  Lathrop  to  Goshen. 
1  said  to  Fresno  the  other  day,  but  I  meant  Gosheu. 

Senator  MORGAN.  Fresno  is  a  mile  or  two  from  Goshen? 

Mr.  HUNTINGTON.  It  is  more  than  that;  and  we  built  the  road  from 
Niles  to  Oakland,  and  I  think  the  Northern  Eailway  from  San  Fran- 
cisco to  Tehama,  and  we  built  the  Southern  Pacific. 

Senator  MORGAN.  I  will  come  to  something  else  now.  You  intended 
to  put  in  the  whole  of  this  statement? 

Mr.  HUNTINGON.  Yes. 

Senator  MORGAN.  You  say  on  page  2: 

I  observe  that  on  page  26  of  the  report  the  commissioners  state  that  the  financial 
inability  of  the  company  to  meet  the  requirements  of  the  readjustment  bill  prepared 
by  the  commissioners  was  the  result  of  the  profligate  and  wanton  dispersion  of  the 
assets  of  the  company  in  dividends  and  the  extravagant  contracts  made  by  the 
company. 

What  is  referred  to  as  extravagant  contracts  I  do  not  know,  as  I  have  no  recollec- 
tion of  any  extravagant  contracts  made  after  the  building  of  the  road  of  any  great 
importance,  and  they  were  always  made  for  the  benefit  of  the  Central  Pacific 
Company. 

I  understand  that  in  consequence  of  your  haste  in  building  this  road 
so  as  to  cut  out  the  Union  Pacific  Company  from  getting  into  Great 
Salt  Lake  Valley  you  were  compelled  to  make  some  very  extravagant 
contracts — hiring  teams  at  $10  a  day. 

Mr.  HUNTINGTON.  We  paid  that  much  for  the  best  ones  in  the  Cen- 
tral Pacific  Company. 

Senator  MORGAN.  You  being  the  company? 

Mr.  HUNTINGTON.  Yes,  if  you  will  have  it  so.    Of  course  I  was  not 


294  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

the  company,  but  if  the  Senator  wishes  it  to  go  on  the  record  in  that 
way  I  have  no  objection. 

Senator  MORGAN.  Then  you  say : 

As  to  the  dividends,  we  carried  the  shares  until  they  began  to  appreciate  and  then 
we  commenced  selling. 

The  shares  appreciated,  I  suppose,  because  of  these  large  dividends 
being  paid  upon  them1? 

Mr.  HUNTING-TON.  The  payment  of  large  dividends  would  naturally 
have  that  effect. 

Senator  MORGAN.  There  was  only  about  sixty  millions  of  stock  of 
the  Central  Pacific  issued  in  all? 

Mr.  HUNTING-TON.  That  was  all  at  that  time. 

Senator  MORGAN.  Arid  you  had  all  of  that  except  a  little  margin — a 
little  fringe — you  four1? 

Mr.  HUNTINGTON.  We  had  a  very  large  majority  of  the  stock.  I 
mean  the  Contract  and  Finance  Company. 

Senator  MORGAN.  These  shares  commenced  to  appreciate,  and  appre- 
ciated rapidly  while  the  dividends  were  being  paid,  did  they  not? 

Mr.  HUNTINGTON.  They  appreciated.  That  would  be  the  natural 
effect. 

Senator  MORGAN.  You  say,  "We  carried  the  shares  until  they  began 
to  appreciate,  and  then  we  commenced  selling  them?" 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Why  did  you  commence  selling  shares  when  they 
began  to  appreciate  and  when  they  were  paying  such  heavy  dividends'? 

Mr.'HuNTiNGTON.  Because  we  were  owing  money. 

Senator  MORGAN.  Who  were  owing  money? 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company. 

Senator  MORGAN.  How  much  did  the  company  owe? 

Mr.  HUNTINGTON.  I  have  not  the  amount  exactly,  but  to  the  best  of 
my  belief  and  knowledge,  I  should  say  that  it  owed  somewhere  from 
nine  to  twelve  million  dollars. 

Senator  MORGAN.  To  whom  was  that  money  owing? 

Mr.  HUNTINGTON.  That  money  was  owing  to  various  parties,  but 
mostly  to  bankers  and  money  lenders  in  New  York. 

Senator  MORGAN.  How  much  was  owing  to  you? 

Mr.  HUNTINGTON.  Not  any  of  it.  I  may  have  had  my  paper  out,  but 
it  was  mere  cross  paper. 

Senator  MORGAN.  Was  any  of  it  owing  to  you? 

Mr.  HUNTINGTON.  No  ;  except  what  was  to  be  passed  on  to  be  paid 
to  others. 

Senator  MORGAN.  You  mean  that  nothing  was  owing  to  you  except 
in  your  nominal  relation  as  agent  to  pay  it  out? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Personally,  there  was  none  of  it  due  to  you? 

Mr.  HUNTINGTON.  There  was,  no  doubt,  some  of  it  due  to  me. 

Senator  MORGAN.  If  any  of  it  was  owing  to  you,  do  you  recollect  it? 

Mr.  HUNTINGTON.  I  do  not  recollect  any  particular  piece,  but  I 
should  say  that  there  was.  I  always  had  my  paper  out  individually 
for  the  company's  debts. 

Senator  MORGAN.  Did  you  sell  this  advancing  stock  (receiving  these 
large  dividends)  in  order  to  raise  money  that  was  due  to  you? 

Mr.  HUNTINGTON.  No;  I  should  not  have  sold  it  for  that  purpose. 

Senator  MORGAN.  Did  you  sell  it  to  raise  money  due  to  other  people? 

Mr.  HUNTINGTON.  I  sold  it  to  pay  debts— it  may  have  been  to  myself 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  295 

or  to  someone  else.  I  sold  it  because  I  had  to  have  money  to  pay  debts 
due  to  others  than  myself. 

Senator  MORGAN.  At  that  time  what  was  the  current  rate  of  interest 
for  money  in  New  York  ? 

Mr.  HUNTINGTON.  I  do  not  know.  That  was  pretty  early  in  the 
seventies,  I  think,  and  we  sold  stock  along  up  to  78. 

Senator  MORGAN.  Was  the  rate  of  interest  as  much  as  5  percent? 

Mr.  HUNTINGTON.  That  is  about  an  average  rate  there. 

Senator  MORGAN.  You  four  gentlemen  could  have  carried  this 
$13,000,000  at  5  per  cent? 

Mr.  HUNTINGTON.  I  can  not  say. 

Senator  MORGAN.  You  would  not  sell  stock  that  was  paying  10  per 
cent  dividends  in  order  to  pay  debts  bearing  5  per  cent  interest? 

Mr.  HUNTINGTON.  I  always  pay  my  debts.  I  never  borrow  money 
to  lend  it.  I  would  not  borrow  money  at  5  per  cent  in  order  to  lend  it 
to  the  best  man  in  New  York  at  10  per  cent. 

Senator  MORGAN.  Were  Stanford  and  Hopkins  and  Crocker  as  cau- 
tious about  their  business  as  you  were? 

Mr.  HUNTINGTON.  I  do  not  think  they  would  borrow  money  to  lend. 
I  had  the  money  matters  to  take  care  of  in  New  York. 

Senator  MORGAN.  How  much  of  the  sixty  millions  of  stock  of  the 
Central  Pacific  did  you  dispose  of  among  you? 

Mr.  HUNTINGTON.  Most  of  it. 

Senator  MORGAN.  Nearly  the  whole  of  it? 

Mr.  HUNTINGTON.  No;  not  nearly  the  whole  of  it,  but  pretty  large 
blocks  of  it. 

Senator  MORGAN.  At  the  time  you  were  disposing  of  that  stock  I 
suppose  you  had  some  consideration  of  the  question  as  to  whether  or 
not  the  constitution  of  California  held  you  responsible  for  the  debts  of 
the  company  because  you  held  the  stock? 

Mr.  HUNTINGTON.  We  never  held  much  stock.  I  do  not  think  that 
we  helel  much  stock.  In  fact,  I  never  thought  there  was  much  in  that 
idea,  so  far  as  the  Government  was  concerned.  I  never  supposed  that 
it  was  in  sight  of  the  property. 

Senator  MORGAN.  You  do  not  know  how  it  was  as  to  the  stockholders 
and  creditors  of  the  company? 

Mr.  HUNTINGTON.  So  far  as  the  Government  was  concerned  I  did 
not  suppose  that  it  was  ever  in  sight  of  the  property. 

Senator  Morgan.  Still  the  question  was  mooted. 

Mr.  HUNTINGTON.  I  do  not  recollect  ever  having  it  up. 

Senator  MORGAN.  Can  you  not  assign  some  reason  for  selling  out 
this  stock J? 

Mr.  HUNTINGTON.  To  pay  debts. 

Senator  MORGAN.  At  what  rate  did  you  sell  the  stock? 

Mr.  HUNTINGTON.  We  sold  it  at  almost  all  prices.  We  sold  some  as 
low  as  19,  and  up  to  85. 

Senator  MORGAN.  Do  you  undertake  to  say  that  you  sold  stock  at 
19  cents  on  the  dollar  that  was  paying  dividends  at  10  per  cent? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Or  paying  a  dividend  at  5  per  cent? 

Mr.  HUNTINGTON.  I  might  sell  it  when  it  was  paying  5  per  cent 
dividend  in  order  to  pay  debts. 

Senator  MORGAN.  When  did  you  do  it? 

Mr.  HUNTINGTON.  1  hardly  think  that  it  was  paying  5  per  cent  divi- 
dends when  we  sold  it;  but  I  should  sell  stock  to  pay  debts.  Some 
times,  when  there  is  a  twist  in  the  money  market  in  New  York,  people 


296  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

bave  to  pay  1  per  cent  over  night,  and  I  did  not  want  to  get  into  that 
position. 

Senator  MORGAN.  Was  it  not  your  plan  to  have  dividends  paid,  and 
then  sell  stock  when  it  was  appreciated  in  the  market? 

Mr.  HUNTINGDON.  No;  we  sold  the  stock  to  pay  debts.  Some  of 
my  people  have  got  Central  Pacific  stock  yet  for  which  they  were 
offered  7G£. 

Senator  MORGAN.  I  did  not  know  but  that  the  price  might  be  sent 
up  by  manipulation. 

Mr.  HUNTINGTON.  There  was  no  manipulation  about  it;  and,  if  you 
will  excuse  me,  Senator,  that  is  not  a  proper  word  to  use  either. 

Senator  MORGAN.  I  will  use  it. 

Mr.  HUNTINGTON.  Well,  that  is  all  right. 

Senator  MORGAN.  I  understand  that  you  sold  this  stock  all  the  way 
from  15  to  85? 

Mr.  HUNTINGTON.  I  think  19  was  the  lowest. 

Senator  MORGAN.  When  did  you  get  rid  of  the  last  of  it? 

Mr.  HUNTINGTON.  I  do  not  know.     We  have  not  got  rid  of  it  all  now. 

Senator  MORGAN.  Have  you  got  stock  in  the  Contract  and  Finance 
Company? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  When  did  you  get  rid  of  that  stock? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Have  you  got  stock  of  the  Central  Pacific  Company 
which  you  received  through  the  Contract  and  Finance  Company? 

Mr.  HuNTiNGTON.  I  think  so. 

Senator  MORGAN.  Have  you  got  some  of  that  stock  for  which  you 
subscribed  originally,  and  which  never  belonged  to  the  Contract  and 
Finance  Company? 

Mr.  HUNTINGTON.  I  can  not  say. 

Senator  MORGAN.  Some  of  the  stock  of  the  Central  Pacific  you  have 
held  on  to,  and  other  stock  of  the  Central  Pacific  you  have  sold.  How 
much  did  you  hold  on  to? 

Mr.  HUNTINGTON.  I  do  not  know  how  much  I  have.  I  have  not  got 
a  great  deal.  Something  less  than  0,000  shares. 

Senator  MORGAN.  How  much  of  that  stock  have  you  sold  personally? 

Mr.  HUNTINGTON.  I  have  sold  the  balance  of  it. 

Senator  MORGAN.  I  mean  on  your  own  account. 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  About  how  much? 

Mr.  HUNTINGTON.  I  can  not  say.  I  never  had  a  great  deal  of  it 
outside  of  the  Contract  and  Finance  Company  shares. 

Senator  MORGAN.  Are  you  willing  to  say  that  you  sold  stock  of  the 
Central  Pacific  as  low  as  15? 

Mr.  HUNTINGTON.  No;  I  have  not  said  so. 

Senator  MORGAN.  As  low  as  18? 

Mr.  HUNTINGTON.  No;  19. 

Senator  MORGAN.  Have  you  sold  stock  of  the  Central  Pacific  at  9 
when  it  was  paying  a  dividend? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  Can  you  tell  who  the  purchaser  was? 

Mr.  HUNTINGTON.  I  can  not.  I  probably  did  not  know  anything 
about  it.  I  probably  never  knew.  Most  of  the  stock  was  sold  in 
blocks.  Perhaps  some  of  it  was  sold  in  small  lots.  It  was  given  to  a 
broker  to  sell,  and  he  would  bring  me  a  check  after  it  was  sold. 

Senator  MORGAN.  If  you  sold  stock  at  19  cents  on  the  dollar  which 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  297' 

was  paying'  a  dividend,  did  you  not  do  it  for  the  purpose  of  breaking 
the  market"? 

Mr.  HUNTINGTON.  No;  I  never  sold  a  share  to  break  the  market, 
and  I  never  bought  a  share  to  put  the  market  up. 

Senator  MORGAN.  Were  you  in  such  distress  for  money  that  you 
took  stock  which  was  worth  par  and  sold  it  at  19? 

Mr.  HUNTINGTON.  Certainly  not. 

Senator  MORGAN.  Then  why  did  you  sell  it  at  19  ! 

Mr.  HUNTINGTON.  Because  19  was  the  market  value  of  it. 

Senator  MORGAN.  When  Avas  the  stock  of  the  Central  Pacific  at  19? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  In  what  year  was  it  at  19? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  The  records  of  Wall  street  will  show  that,  of 
course.  I  want  to  find  out  when  that  thing  first  occurred — the  selling 
of  stock  at  19  that  was  paying  dividends. 

Mr.  HUNTINGTON.  I  clo  not  know. 

Senator  MORGAN.  Did  you  ever  hear  of  stock  selling  at  19  that  was 
paying  dividends? 

Mr.  HUNTINGTON.  Yes;  the  Central  Pacific. 

Senator  MORGAN.  Is  not  that  a  very  remarkable  thing? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Is  it  a  common  thing? 

Mr.  HUNTINGTON.  No;  it  is  not  common. 

Senator  MORGAN.  You  were  able  to  hold  this  stock? 

Mr.  HUNTINGTON.  I  always  sell  anything  that  I  have  when  I  want 
money. 

Senator  MORGAN.  I  asked  you  whether  you  were  able  to  hold  the 
stock. 

Mr.  HUNTINGTON.  I  can  not  tell  to-day  whether  I  was  able  to  hold 
it  when  I  sold  it.  I  do  not  know  that  I  ever  got  into  a  place  where  I 
had  not  something  to  sell  in  order  to  pay  my  debts. 

Senator  MORGAN.  Have  you  any  doubt  now  that  you  were  able  to 
hold  it? 

Mr.  HUNTINGTON.  I  might  have  sold  out  something  else,  probably. 
I  have  seen  a  great  many  times  in  my  life  when  I  have  had  to  sell  some- 
thing. 

Senator  MORGAN.  Was  it  before  or  after  the  passage  of  the  Thurman 
Act  that  you  sold  Central  Pacific  stock  at  19? 

Mr.  HUNTINGTON.  I  think  it  was  after,  but  I  am  not  sure.  It  may 
have  been  before. 

Senator  MORGAN.  How  long  after  was  it? 

Mr.  HUNTINGTON.  It  must  have  been  a  considerable  time  after,  for 
the  shares  at  that  time  were  worth  more  than  that. 

Senator  MORGAN.  Did  you  put  the  stock  on  the  market  yourself? 

Mr.  HUNTINGTON.  I  gave  it  to  some  broker  to  sell. 

Senator  MORGAN.  Did  you  tell  him  to  sell  as  low  as  he  could? 

Mr.  HUNTINGTON.  I  have  answered  that  question,  but  it  is  a  question 
which  Senator  Morgan  ought  not  to  ask  me.  If  you  want  it  answered, 
I  will  answer  it. 

Senator  MORGAN.  I  want  it  answered. 

Mr.  HUNTINGTON.  I  did  not  tell  him  to  sell  as  low  as  he  could. 

Senator  MORGAN.  Did  you  tell  him  to  sell  as  high  as  he  could? 

Mr.  HUNTINGTON.  Probably  not.  He  could  not  get  over  the  market 
price,  and  I  probably  told  him  to  sell  it  at  the  market  price. 

Senator  MORGAN.  You  did  not  sell  that  stock  at  19  cents  on  the  dol- 
lar when  it  was  paying  a  dividend? 


298  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGDON.  I  am  inclined  to  think  that  there  was  a  small  divi- 
dend on  it,  but  very  small. 

Senator  MORGAN.  To  all  appearance,  the  stock  was  worth  par,  and 
you  sold  it  at  19. 

Mr.  HUNTINGTON.  I  did  not  say  that. 

Senator  MORGAN.  Stock  which  is  paying  a  dividend  would  be  selling 
at  par. 

Mr.  HUNTINGTON.  Not  at  all.  It  would  depend  upon  what  the  divi- 
dend was.  It  would  depend  upon  many  things.  If  a  person  wants 
money  and  he  has  got  stock  to  sell  which  he  can  spare,  he  sells  it  in 
order  to  get  the  money.  When  stock  is  selling  at  19  or  20  and  is  pay- 
ing 2  per  cent  dividend,  that  is  eqtial  to  a  dividend  of  10  per  cent  at 
par. 

Senator  MORGAN.  What  effect  did  the  selling  of  the  Central  Pacific 
stock  at  19  have  on  the  stock  of  the  Union  Pacific  at  the  same  time? 

Mr.  HUNTINGTON.  It  would  not  have  any. 

Senator  MORGAN.  What  effect  did  it^have? 

Mr.  HUNTINGTON.  I  do  not  think  ft  had  any  effect.  The  Union 
Pacific  people  always  attend  to  their  own  shares.  Probably  they  sold 
their  stock  at  the  market  price.  I  was  offered  a  majority  of  the  Union 
Pacific  shares  once  at  7  or  8. 

Senator  MORGAN.  These  roads  being  united  joint  lines  as  described 
by  the  Supreme  Court  of  the  United  States — a  great  national  road  to 
be  operated  as  one  road — would  not  your  selling  stock  of  the  Central 
Pacific  at  19  which  was  actually  paying  a  dividend  have  an  effect  upon 
the  other  end  of  that  great  national  railroad  and  on  the  value  of  its 
stock  ? 

Mr.  HUNTINGTON.  I  suppose  it  would. 

Senator  MORGAN.  Did  you  not  sell  it  on  purpose  that  it  would  have 
such  effect? 

Mr.  HUNTINGTON.  I  have  answered  that  question  once,  and  will 
answer  it  again;  no. 

Senator  MORGAN.  What  purpose  did  you  havef 

Mr.  HUNTINGTON.  To  get  money. 

Senator  MORGAN.  For  what  purpose? 

Mr.  HUNTINGTON.  To  pay  debts. 

Senator  MORGAN.  What  debts  "> 

Mr.  HUNTINGTON.  Debts  that  1  owed. 

Senator  MORGAN.  To  whom  did  you  owe  them! 

Mr.  HUNTINGTON.  To  creditors. 

Senator  MORGAN.  Who  were  they? 

Mr.  HUNTINGTON.  The  men  that  I  borrowed  the  money  from. 

Senator  MORGAN.  You  do  not  mean  to  tell  me  who  they  were? 

Mr.  HUNTINGTON.  I  do  not  know.  If  I  did  I  would  tell  you.  Things 
are  changing  every  day. 

Senator  MOGRAN.  Do  you  not  know  that  this  sale  of  Central  Pacific 
stock  at  19  did  have  an  effect  on  the  stock  of  the  Union  Pacific? 

Mr.  HUNTINGTON.  No;  I  think  not. 

Senator  MORGAN.  Do  you  think  that  that  stock  stood  all  up  yonder? 

Mr.  HUNTINGTON.  No;  I  do  not  know  what  that  stock  was  selling 
for. 

Senator  MORGAN.  Did  you  not  know  at  the  time? 

Mr.  HUNTINGTON.  No;  and  I  did  not  care.  I  did  not  want  to  buy 
any  Union  Pacific  shares;  but  the  time  never  came  that  I  did  not  want 
the  Union  Pacific  to  have  the  best  it  could  have. 

Senator  MOEGAN.  Including  the  ownership  of  the  Central  Pacific  i 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  299 

Mr.  HUNTINGTON.  If  they  owned  it,  of  course  they  would  have  it. 

Senator  MORGAN.  Yon  always  wished  the  Union  Pacific  to  have  the 
best  it  could  have,  including  the  ownership  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  No;  1  did  not  say  that.  I  think  the  Central 
Pacific  has  been  managed  better  than  the  Union  Pacific.  We  have 
always  met  our  obligations  while  working  under  terrible  disadvantages. 
The  Central  Pacific  is  as  clean  as  any  road  that  was  ever  built  in 
America,  I  do  not  care  who  says  anything  to  the  contrary. 

Senator  MORGAN.  I  want  to  give  you  a  final  opportunity  to  explain 
to  the  committee  what  stress  of  monetary  embarrassment  you  were  in, 
or  the  company  of  which  you  were  vice-president  was  in,  when  you  put 
on  the  market  in  this  way  and  sold  stock  of  the  Central  Pacific  at  19 
when  the  stock  was  paying  a  dividend. 

Mr.  HUNTINGTON.  Simply  my  own  judgment  was  that  if  we  wanted 
money,  and  if  that  was  the  best  way  to  get  money,  we  had  to  sell  the 
stock. 

Senator  MORGAN.  You  spoke  of  selling  it  in  blocks. 

Mr.  HUNTINGTON.  Not  at  that  price.  I  do  not  think  I  ever  sold  any 
so  low  in  blocks. 

Senator  MORGAN.  Plow  much  stock  did  you  sell  at  19? 

Mr.  HUNTINGTON.  Not  a  great  deal. 

Senator  MORGAN.  How  much  ? 

Mr.  HUNTINGTON.  Probably  two  or  three  thousand  shares. 

Senator  MORGAN.  Who  paid  it? 

Mr.  HUNTINGTON.  I  never  knew.    I  got  a  check  for  it  from  the  broker. 

Senator  MORGAN.  Did  not  another  broker  buy  it  under  your  direc- 
tions? 

Mr.  HUNTINGTON.  No;  I  do  not  know  anything  about  the  crooked 
ways  which  Senator  Morgan  seems  to  understand.  I  never  bought 
anything  to  put  shares  up,  nor  sold  anything  to  put  shares  down. 

Senator  MORGAN.  I  have  been  only  two  or  three  times  in  Wall  street, 
but  1  have  learned  about  such  crooked  ways  as  that. 

Mr.  HUNTINGTON.  I  have  been  in  New  York  for  sixty  years,  and  have 
been  in  active  business  down  town  for  thirty- five  years,  and  never  bought 
a  thing  on  speculation  in  my  life.  I  do  not  think  I  ever  bought  on 
margin  in  my  life.  I  never  sold  a  thing  on  speculation.  When  I 
wanted  money  I  have  sold  something  to  get  it. 

The  CHAIRMAN.  In  the  sale  of  stock  the  transfer  is  signed  in  blank 
and  handed  to  the  broker,  arid  he  hands  it  to  the  buyer,  who  gets  a  new 
certificate? 

Mr.  HUNTINGTON.  Yes. 

The  CHAIRMAN.  Certificates  are  always  transferred  in  blank? 

Mr.  HUNTINGTON.  Yes. 

The  CHAIRMAN.  And  when  the  holder  wants  his  certificate,  he  goes 
to  the  company  that  issues  certificates  oi  stock  and  gets  it? 

Mr.  HUNTINGTON.  Yes. 

The  CHAIRMAN.  And  it  is  the  custom  always  to  transfer  in  blank? 

Mr.  HUNTINGTON.  Yes.  I  have  always  given  the  certificates  to  a 
broker  and  said  to  him,  "Go  and  sell  these  shares  on  the  market." 
The  whole  transaction  is  with  him. 

Senator  MORGAN.  And  the  broker  who  is  instructed  to  buy  the  stock 
goes  to  the  same  man  and  gets  it  and  gives  his  check  for  the  amount? 

Mr.  HUNTINGTON.  I  do  not  know  anything  about  that.  I  have  never 
given  orders  to  buy  and  sell  at  the  same  time.  I  never  did  anything 
to  put  shares  up  or  to  put  shares  down.  I  have  been  a  railroad  builder 


300  GOVERNMENT   DEBT    OP    THE    PACIFIC    RAILROADS. 

thirty-five  years,  and  have  tried  to  do  the  best  that  I  could  for  the  com- 
pany I  was  working  for  in  the  manipulation  of  its  securities. 

Senator  MORGAN.  What  was  the  lowest  point  at  which  you  sold 
Central  Pacific  stock  before  the  Thurinaii  Act? 

Mr.  HUNTINGKTON.  I  do  not  know. 

Senator  MORGAN.  About  how  low? 

Mr.  HUNTINGTON.  I  do  not  know.  I  bought  once,  or  the  Contract 
and  Finance  Company  bought,  all  Charles  Crocker's  shares  of  Central 
Pacific  stock  at  J2£  a  share.  He  went  to  Europe,  and  when  he  came 
back  I  told  him  that  we  did  not  want  the  stock,  and  that  if  he  took 
back  his  interest  in  the  concern  as  it  was  I  would  like  to  have  him  do 
so.  He  said  that  he  would  rather  have  the  money,  and  I  said  I  would 
rather  he  took  the  shares,  and  he  took  them.  That  was  quite  a  block. 
The  Contract  and  Finance  Company  had  bought  them  all  at  12£,  and 
when  Mr.  Crocker  came  back  I  asked  him  to  take  them  back,  and  he 
did  so.  That  was  two  years  or  more  after  the  road  was  built. 

Senator  MORGAN.  You  say  here: 

As  I  have  already  said,  we  sold  our  shares  to  enable  us  to  pay  the  debts  incurred 
in  the  construction  of  the  road  as  soon  as  the  shares  could  be  sold  at  prices  suffi- 
cient to  do  this,  and  the  stock  was  therefore  widely  distributed  while  the  divi- 
dends were  being  paid. 

Mr.  HUNTINGTON.  Yes:  that  is  correct,  I  believe. 

Senator  MORGAN.  You  still  hold  on  to  some  of  it  and  some  of  it  you 
sold  out  at  19? 

Mr.  HUNTINGTON.  There  is  some  stock  now  in  the  hands  of  our  people 
for  which  7C  was  offered. 

Senator  MORGAN.  Did  you  pay  over  to  the  Contract  and'Finance  Com- 
pany the  money  which  you  received  from  the  sale  of  Central  Pacific 
stock  at  19  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  That  was  your  personal  money? 

Mr.  HUNTINGTON.  It  was  my  personal  money. 

Senator  MORGAN  (reading) : 

I  observe  that  on  page  50  the  commissioners  state  that  they  have  reached  the  con- 
clusion that  with  the  single  exception  of  the  then  existing  administration  of  the 
Union  Pacific,  all  the  debts  and  obligations  referred  to  as  assumed  by  the  managers 
of  the  roads  had  been  constantly  and  persistently  disregarded,  and  the  result  was 
that  those  who  had  controlled  and  directed  the  construction  and  development  of  the 
companies  had  become  possessed  of  their  surplus  assets  through  issue  of  bonds  and 
stocks  and  payments  of  dividends  voted  by  themselves,  while  the  great  creditor,  the 
Government  of  the  United  States,  finds  itself  substantially  without  adequate  secu- 
rity for  the  repayment  of  its  loans. 

In  reply  to  this,  I  would  say  that  the  United  States  expressly  provided  in  1862  and 
1864,  and  again  in  1878,  what  security  should  be  reserved  for  the  repayment  of  its  loans, 
and  every  dollar  of  this  security  was  reserved  in  accordance  with  the  provisions  of 
these  acts.  We  have  never  held  that  the  Union  Pacific  administration,  which  the 
commission  refer  to  as  a  single  exception,  ever  reserved  a  dollar  more  as  security  for 
the  repayment  of  its  loans  than  was  required  to  be  reserved  by  these  acts,  which  we 
have  fully  complied  with.  But  time  has  shown  how  wrong  the  commissioners  were 
in  their. estimate  of  the  results  of  the  Union  Pacific  administration  which  they  take 
so  much  pains  to  extol  as  compared  with  the  administration  of  the  Central  Pacific 
properties.  Time  has  shown  that  although  the  Central  Pacific  properties  were  sub- 
ject to  a  larger  amount  of  fixed  charges,  on  account  of  greater  physical  obstructions 
which  had  to  be  overcome  in  constructing  the  roads,  and  although  the  properties 
were  operated  at  a  great  disadvantage,  all  material  being  higher,  and  coal  used  in 
California  being,  say,  four  times  as  expensive  as  that  used  by'the  Union  Pacific,  the 
administration  of  the  Central  Pacific  has  paid  all  its  debts  and  obligations,  while  the 
Union  Pacific  has  defaulted  even  on  the  interest  of  her  first-mortgage  bonds. 

I  think  that  is  a  fair  argument  upon  that  proposition,  but  it  does  not 
contain  any  statement  of  facts. 
Mr.  HUNTINGTON.  It  states  facts  as  they  exist  to-day. 


GOVERNMENT    DEBT    OP    THE    PACIFIC    RAILROADS.  3Q1 

Senator  MORGAN.  The  Union  Pacific  has  lost  money  very  largely  in 
consequence  of  the  diversion  of  traffic  from  the  Central  Pacific  to  the 
Southern  Pacific — do  you  not  think  that  it  has? 

(Before  Mr.  Huntington  had  answered  this  question  his  examination 
was  suspended,  Senator  Morgan  stating  that  he  would  look  through 
Mr.  Huntington's  statement  to-night,  and  would  abbreviate  the 
examination  to-morrow.) 

The  act  of  incorporation  of  the  Southern  Pacific  Company  was  put 
in  evidence,  as  follows : 

[Chapter  403.] 
AN  ACT  to  incorporate  the  Southern  Pacific  Company. 

Be  it  enacted  ~by  the  General  Assembly  of  the  Commonivealth  of  Kentucky : 

SECTION  1.  That  Henry  D.  McHenry,  Wm.  G.  Duncan,  Samuel  E.  Hill,  Samuel  M. 
Cox,  Henry  McHenry,  jr.,  and  their  associates  and  successors  and  assigns,  be,  and 
they  are  hereby,  created  and  constituted  a  body  corporate  and  politic,  under  the  name 
of  the  Southern  Pacific  Company,  and  as  such  shall  have  perpetual  succession,  and 
be  capable  in  law  to  purchase,  grant,  sell,  or  receive,  in  trust  or  otherwise,  all  kinds 
of  personal  and  real  property  to  such  amount  as  the  directors  of  said  company  may, 
from  time  to  time,  determine;  and  to  contract  and  be  contracted  with,  sue  and  be 
sued,  plead  and  be  impleaded,  appear  and  prosecute  to  final  judgments  all  suits  or 
actions  at  law  or  in  equity  in  all  courts  and  places;  and  to  have  and  use  a  common 
seal,  and  to  alter  the  same  at  pleasure;  and  to  make  and  establish  such  by-laws, 
rules,  and  regulations  for  the  government  of  said  company  and  the  conduct  of  its 
business  as  said  corporation  or  the  stockholders  therein  shall  deem  expedient  or  nec- 
essary for  the  manag-ernent  of  its  affairs,  not  inconsistent  with  the  constitution  and 
laws  of  this  State  or  of  the  United  States;  and  generally  to  do  and  execute'all  acts, 
matters,  and  things  which  may  be  deemed  necessary  or  convenient  to  carry  into 
effect  the  powers  and  privileges  herein  granted:  Provided,  however,  that  said  cor- 
poration shall  not  have  power  to  make  joint  stock  with,  lease,  own,  or  operate  any 
railroad  within  the  State  of  Kentucky. 

SEC.  2.  The  said  corporation  is  hereby  authorized  and  empowered  to  contract  for 
and  acquire  by  purchase  or  otherwise,  bonds,  stocks,  obligations,  and  securities  of 
any  corporation,  company,  or  association  now  existing  or  hereafter  formed  or  consti- 
tuted, and  bonds,  obligations,  and  securities  of  any  individuals,  State,  Territory, 
government,  or  local  authorities  whatsoever,  and  to  enter  into  contracts  with  any 
corporation,  company,  or  association,  individuals,  State,  Territory,  government,  or 
local  authorities  in  respect  of  their  bonds,  stocks,  obligations,  and  securities,  or  in 
respect  of  the  construction,  establishment,  acquisition,  owning,  equipment,  leasing, 
maintenance,  or  operation  of  any  railroads,  telegraphs,  or  steamship  lines,  or  any 
public  or  private  improvements,  or  any  appurtenances  thereof,  in  any  State  or  Ter- 
ritory of  the  United  States,  or  in  any  foreign  country,  and  to  buy,  hold,  sell,  and 
deal  in  all  kinds  of  public  and  private  stocks,  bonds,  and  securities;  and  said  corpo- 
ration may  borrow  and  loan  money,  issue  its  own  bonds  or  other  evidences  of  indebt- 
edness, and  sell,  negotiate,  and  pledge  the  same,  to  such  amounts,' upon  such  terms, 
and  in  such  manner  as  may  from  time  to  time  be  determined  by  the  directors  of  said 
corporation ;  and  it  may  mortgage  all  or  any  part  of  its  property,  assets,  and  fran- 
chises to  secure  such  bonds  and  the  interest  thereon,  on  such  terms  and  conditions 
as  shall  on  that  behalf  be  prescribed  by  its  board  of  directors. 

SEC.  3.  The  capital  stock  of  said  corporation  shall  be  one  million  dollars,  divided 
into  shares  of  one  hundred  dollars  each,  which  shares  shall  be  deemed  personal 
property,  and  may  be  issued,  transferred,  and  forfeited  for  nonpayment  in  such 
manner  as  the  board  of  directors  of  such  corporation  may  determine;  and  no  person 
shall  be  in  anywise  liable  as  a  stockholder  of  said  corporation  after  said  capital 
stock  to  such  amount  of  one  million  dollars  shall  have  been  paid  in  in  cash,  and  a  cer- 
tificate to  that  effect  signed  and  sworn  to  by  the  treasurer  and  a  majority  of  the  board 
of  directors  of  said  corporation  shall  have  been  filed  in  the  office  of  the  secretary  of 
state  of  this  State;  nor  shall  the  said  corporation,  nor  any  of  the  officers  or  agents 
thereof,  be  thereafter  bound  to  make  any  further  returns  or  certificates :  Provided, 
however,  that  if,  after  the  payment  of  such  capital  stock,  any  part  thereof  shall  be 
withdrawn  for  or  refunded  to  any  of  the  stockholders  when  the  property  of  the 
corporation  is  insufficient  or  will  be  thereby  rendered  insufficient  for  the  payment  of 
all  its  debts,  the  stockholder  receiving  the  same  shall  be  bound  and  obliged  to  repay 
to  said  corporation  or  its  creditors  the  amount  so  withdrawn  or  refunded. 

SEC.  4.  Any  two  of  the  persons  above  named  as  corporators  of  said  corporation 
may  call  the  first  meeting  for  the  organization  of  such  corporation  at  such  time  and 
place  as  they  may  appoint,  by  mailing  a  proper  notice  of  such  meeting  to  each  of 
such  corporators  at  least  ten  days  before  the  time  appointed;  and  in  case  a  majority 
of  such  corporators  shall  attend  such  meetings,  either  in  person  or  by  proxy,  they 


302  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

may  open  books  for  subscriptions  to  its  capital  stock;  and  whenever  five  hundred 
thousand  dollars  shall  be  subscribed  and  ten  per  cent  of  said  subscriptions  shall  be 
paid  in  cash,  the  stockholders  of  said  corporation  may  organize  the  same,  and  said 
corporation  may  proceed  to  business. 

SKC.  5.  Each  share  of  stock  entitle  the  holder  thereof  to  one  vote,  in  person  or  by 
proxy,  at  all  meetings  of  the  stockholders;  the  holders  of  a  majority  in  interest  of 
the  capital  stock,  present  in  person  or  bj'  proxy,  shall  constitute  a  quorum,  (the 
corporation  shall  have  a  lien  on  all  the  stock  and  property  of  its  members  invested 
therein  for  all  debts  due  by  them  to  said  corporation,  which  lieu  may  be  enforced 
in  such  rnamier  as  the  by-laws  shall  prescribe). 

SEC.  6.  The  stock,  property,  and  affairs  of  said  corporation  shall  be  managed  by  a 
board  of  directors  of  such  number,  not  less  than  three,  as  may  be  from  time  to  time 
determined  by  the  corporators  or  stockholders.  The  directors  shall  be  elected  by 
the  stockholders  at  such  time  and  place,  and  in  such  manner,  and  for  such  terms, 'as 
the  stockholders  shall  from  time  to  time  determine.  Meetings  of  directors  or  stock- 
holders may  beheld  within  or  without  the  State.  No  person  shall  be  elected  adirector 
who  is  not  a  stockholder  of  the  corporation.  A  majority  of  the  directors  shall  consti- 
tute a  quorum  of  said  board  for  the  transaction  of  business.  The  directors  shall  appoint 
from  their  own  number  a  president,  and  they  shall  also  appoint  a  clerk  and  treasurer, 
and  such  other  officers  and  agents  as  they  may  deem  proper,  to  hold  their  offices  during 
the  pleasure  of  the  board.  In  case  of  a  vacancy  or  vacancies  in  the  board,  the  remain- 
ing directors  may  fill  such  vacancy  or  vacancies.  The  capital  stock  of  said  corpora- 
tion may  be  increased  from  time  to  time  to  such  sum  as  may  be  determined  by  the 
board  of  directors  of  said  corporation,  provided  such  increase  or  diminution  shall  be 
approved  by  at  least  two  thirds  in  interest  of  the  stockholders  of  said  corporation. 

SKC.  7.  The  annual  tax  upon  said  corporation  shall  be  the  same  as  is  now  fixed  by 
law  for  broker's  license:  Provided,  That  all  property  owned  by  said  corporation  and 
situated  in  the  State  shall  pay  the  same  State  and  local  tax  as  is  assessed  upon  similar 
property;  and  capital  stock  in  said  corporation  owned  by  citizens  of  the  State  shall 
be  assessed  against  the  holders  thereof  as  choses  in  action  under  the  equalization  law. 

SEC.  8.  The  company  shall  keep  an  office  for  the  transaction  of  business,  and  the 
clerk  or  assistant  clerk  of  said  corporation  shall  reside  within  the  State  of  Kentucky, 
but  the  said  corporation  may  keep  offices  at  such  places  outside  of  this  State  as  in 
the  judgment  of  its  board  of  directors  its  business  may  from  time  to  time  require: 
Provided,  That  nothing  herein  contained  shall  be  construed  as  granting  any  lottery 
or  banking  privileges. 

SEC.  9.  This  act  shall  take  effect  immediately  upon  its  passage. 

CHAS.  OFFUTT, 

Spealcer  of  the  House  of  Representatives. 
.  JAMES  R.  HINDMAN, 

Speaker  of  the  /Senate. 

Approved  March  17, 1884. 
J.  PROCTOR  KNOTT. 

By  the  governor. 

JAS.  A.  McKuNZiK,  Secretary  of  State. 

[Chapter  601.] 

AN  ACT  to  amend  "An  act  to  incorporate  the  Southern  Pacific  Company,"  approved  March  sev- 
enteenth, eighteen  hundred  and  eighty -four. 

Be  it  enacted  by  the  General  Assembly  of  the  Commonwealth  of  Kentucky: 

SECTION  1.  That  the  act  entitled  "An  act  to  incorporate  the  Southern  Pacific 
Company/'  wrhich  was  approved  March  seventeenth,  eighteen  hundred  and  eighty- 
four,  l)e  and  the  same  is  amended  by  adding  to  section  1  thereof  the  following  words, 
to  wit:  except  subject  to  and  in  conformity  with  the  provisions  of  the  laws  of  the 
State  of  Kentucky  applicable  to  railroads,  and  acquiring  no  special  rights  that 
may  be  possessed  by  any  railroads  in  the  State  except  the  general  and  ordinary 
rights  of  common  carriers  as  possessed  by  railroads  generally. 
SEC.  2.  This  act  shall  take  effect  from  its  passage. 

BEN  JOHNSON, 
Speaker  of  the  House  of  Representatives. 

J.  W.  BRYAN, 
Speaker  of  the  Senate. 
Approved  March  21,  1888. 

S.    B.    BUCKNER. 

By  the  governor. 

GEO.  M.  ADAMS,  Secretary  of  State. 

The  committee  adjourned  till  to-morrow,  Saturday,  March  7,  at 
10.30  a.  m. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  303 

WASHINGTON,  Saturday,  March  7, 1896. 
Tlio,  committee  met  at  10.30  a.  m. 
"Present:  Senators  Gear  (chairman),  Stewart,  Frye,  and  Morgan. 

CENTRAL  PACIFIC  RAILROAD. 
EXAMINATION  OF  C.  P.  HUNTINGTON— Continued. 

Senator  Morgan  bad  read  by  the  stenographer  the  last  question  asked 
by  him  in  yesterday's  session,  and  which  had  then  remained  unanswered, 
as  follows: 

Senator  MORGAN.  The  Union  Pacific  has  lost  money  very  largely  in 
consequence  of  the  diversion  of  traffic  from  the  Central  Pacific  to  the 
Southern  Pacific.  Do  you  not  think- that  it  has? 

Mr.  HUNTINGTON.  Well,  it  has  not  to  my  knowledge;  and  it  is  not 
very  likely  that  I  would  have  known  it  if  it  had.  As  I  said  before,  out 
of  the  seven  or  eight  lines  in  this  business,  all  the  time  the  Central 
Pacific  has  had  more  than  50  per  cent  of  the  business. 

Senator  MORGAN.  Of  all  the  business? 

Mr.  HUNTINGTON.  Of  all  the  business  done  by  all-rail  lines. 

Senator  MORGAN.  How  do  you  ascertain  that  fact? 

Mr,  HUNTINGTON.  We  get  it  from  our  traffic  men  and  from  the  oper- 
ations of  the  road.  It  is  in  my  testimony  before  the  commission.  I  got 
the  exact  figures  at  that  time,  and  there  was  no  time  when  the  percent- 
age of  the  Central  Pacific  business  was  as  low  as  50. 

Senator  MORGAN.  Was  the  percentage  of  the  Central  Pacific  in  this 
business  adjusted  in  any  way  between  the  various  companies  that 
touched  the  Pacific  Ocean? 

Mr.  HUNTINGTON.  I  so  understand. 

Senator  MORGAN.  Do  you  know? 

Mr.  HUNTINGTON.  Yes;  I  may  say  I  know.  I  do  not  know  whether 
the  tonnage  is  divided  or  not,  or  whether  the  roads  have  agreed  to  these 
different  percentages. 

Senator  MORGAN.  To  the  rates  for  passengers  and  freight! 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Of  all  kinds  and  descriptions? 

Mr.  HUNTINGTON.  So  I  understand. 

Senator  MORGAN.  What  roads  were  in  that  agreement! 

Mr.  HUNTINGTON.  I  think  all  the  roads. 

Senator  MORGAN.  Name  them. 

Mr.  HUNTINGTON.  The  Canadian  Pacific  most  of  the  time;  the  Great 
Northern;  the  Northern  Pacific;  the  Union  Pacific,  having  an  inde- 
pendent line  across  the  continent;  the  Atchison,  Topeka  and  Santa  Fe; 
the  Texas  Pacific;  the  Chicago,  Burlington  and  Quincy,  I  think;  the 
Chicago,  Rock  Island  and  Pacific;  the  Missouri  Pacific,  and  perhaps 
some  others. 

Senator  MORGAN.  Were  these  agreements  in  writing? 

Mr.  HUNTINGTON.  I  should  suppose  they  were.  I  do  not  think  I 
have  ever  seen  any  agreement  in  writing;  but  it  is  pretty  notorious, 
I  believe,  that  that  agreement  was  made. 

Senator  MORGAN.  Who  made  that  agreement  on  behalf  of  the  Cen- 
tral Pacific? 

Mr.  HUNTINGTON.  I  presume  Mr.  Stubbs;  he  is  the  head  of  the  traf- 
fic department. 

Senator  MORGAN.  Who  made  it  on  behalf  of  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  do  not  know;  I  think  probably  Mr.  Stubbs, 


304  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Did  Mr.  Stubbs  make  such  an  agreement  on  behalf 
of  any  other  road  besides  those  two? 

Mr.  HUNTINGTON.  I  should  say  not. 

Senator  MORGAN.  He  is  the  traffic  agent  for  both  the  Central  Pacific 
and  the  Southern  Pacific? 

Mr.  HUNTINGTON.  Yesj  he  is  at  the  head  of  the  traffic  department. 

Senator  MORGAN.  Did  that  agreement  increase  the  rates  of  freight 
as  well  as  percentages — this  division  or  pool? 

Mr.  HUNTINGTON.  It  is  hardly  a  pool,  perhaps,  but  an  understanding 
that  the  rates  shall  be  so  and  so,  and  I  think  there  was  a  division  of 
traffic.  I  do  not  have  much  to  do  with  the  traffic  department. 

Senator  MORGAN.  But  you  know  how  it  is? 

Mr.  HUNTINGTON.  Yes  5  but  the  heads  of  the  traffic  department 
regulate  these  things. 

Senator  MORGAN.  Whether  we  call  it  a  pool  or  an  agreement 

Mr.  HUNTINGTON.  I  do  not  think  it  is  a  pool,  because  I  think  each 
road  handles  its  own  receipts.  The  rates  are  agreed  upon.  I  do  not 
say  that  the  rates  are  all  the  same.  I  think  there  is  a  differential,  the 
Canadian  Pacific  having  the  right  to  put  in  a  lower  rate. 

Senator  MORGAN.  Why? 

Mr.  HUNTINGTON.  I  will  not  say  directly  that  it  does,  but  I  think 
that  is  the  custom  with  all  the  railroads.  The  New  York  Central  and 
the  Pennsylvania  have  the  maximum  rates;  and  the  other  roads  have 
slight  differentials  in  their  favor,  that  is,  the  right  to  make  lower  rates. 

Senator  MORGAN.  Is  the  rail  line  of  the  Canadian  Pacific  longer  than 
the  rail  line  of  the  Southern  P.acific  from  Portland,  Oreg.,  to  New 
Orleans? 

Mr.  HUNTINGTON.  No;  I  think  the  Canadian  Pacific  is  running  from 
Duluth;  and  its  rail  line  is  shorter  than  that  of  the  Southern  Pacific. 
The  Southern  Pacific  is  about  2,500  miles. 

Senator  MORGAN.  How  would  it  be  between  Port  Town  send  and  the 
eastern  terminus  of  the  Canadian  Pacific? 

Mr.  HUNTINGTON.  The  Canadian  Pacific  does  not  go  to  Port  Town- 
send;  it  goes  to  Vancouver. 

Senator  MORGAN.  In  the  same  neighborhood  ? 

Mr.  HUNTINGTON.  There  is  quite  a  difference  between  them.  One  is 
on  the  Gulf  of  Georgia  and  the  other  on  Puget  Sound. 

Senator  MORGAN.  What  is  the  distance  from  Vancouver  to  the 
eastern  rail  terminus  of  the  Canadian  Pacific? 

Mr.  HUNTINGTON.  I  do  not  know.  I  should  not  think  it  more  than 
2,000  miles. 

Senator  MORGAN.  It  is  not  as  far  as  from  Portland,  Oreg.,  to  New 
Orleans? 

Mr.  HUNTINGTON.  It  is  not  so  long,  I  think,  by  a  thousand  miles. 

Senator  MORGAN.  This  differential  was  made  up  in  favor  of  the  road 
from  Portland  to  New  Orleans,  and  of  the  road  from  Vancouver  to  the 
eastern  terminus  of  the  Canadian  Pacific? 

Mr.  HUNTINGTON.  I  do  not  think  it  is  made  up  in  that  way.  I  think 
that  San  Francisco  is  the  point. 

Senator  MORGAN.  If  San  Francisco  is  the  point  or  base  of  the  calcu- 
lation of  the  freight,  and  also  of  the  division  of  the  income,  then  that, 
I  suppose,  would  necessarily  give  an  advantage  in  the  transportation 
in  favor  of  the  Southern  Pacific  -over  its  line  or  lines  between  San 
Francisco  and  Portland,  Oreg. 

Mr.  HUNTINGTON.  I  do  not  understand  the  Senator. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  305 

Senator  MORGAN.  Inasmuch  as  the  Southern  Pacific  would  have  the 
haul  on  its  lines  from  San  Francisco,  that  being  the  point  of  starting 

Mr.  HUNTINGTON.  This  is  done  by  water.  The  Canadian  Pacific  has 
a  line  of  steamers  from  Vancouver  to  San  Francisco. 

Senator  MORGAN.  Then  the  Canadian  Pacific  puts  its  line  of  steam- 
ers into  the  pool  also? 

Mr.  HUNTINGTON.  I  take  it  so.  But  it  is  not  a  pool ;  it  is  an  agree- 
ment for  rates.  A  pool  is  where  the  parties  to  it  put  into  a  general 
pot  and  divide  the  income  from  a  certain  business,  each  having  a 
percentage. 

Senator  MORGAN.  And  that  was  not  the  way  in  this  easel 

Mr.  HUNTINGTON.  No,  I  think  not. 

Senator  MORGAN.  This  was  only  what? 

Mr.  HUNTINGTON.  An  agreement  as  to  rates. 

Senator  MORGAN.  What  division  was  given  to  the  Central  Pacific 
in  that  agreement? 

Mr.  HUNTINGTON.  They  gave  the  Central  Pacific  more  than  50  per 
cent.  Exactly  how  much  more  I  do  not  recollect. 

Senator  MORGAN.  Fifty  per  cent  of  what? 

Mr.  HUNTINGTON.  Fifty  per  cent  of  the  business  from  San  Francisco 
to  the  Missouri  River. 

Senator  MORGAN.  That  was  not  50  per  cent  of  the  freight  rates,  but 
50  per  cent  of  the  income? 

Mr.  HUNTINGTON.  Probably.    I  do  not  know  how  it  was  made  up. 

Senator  MORGAN.  How  could  they  make  up  an  estimate  by  which 
the  Central  Pacific  would  get  more  than  50  per  cent  (say,  54  per  cent) 
unless  they  had  first  ascertained  the  income  of  all  these  different  lines? 

Mr.  HUNTINGTON.  I  do  not  know  that  they  could.  I  suppose  the  mat- 
ter had  to  be  equalized.  I  am  not  familiar  with  the  details  of  the 
operation. 

Senator  MOROAN.  That  agreement  included  the  freight  going  east, 
as  well  as  the  freight  going  west. 

Mr.  HUNTINGTON.  I  think  so;  but  still  it  is  on  my  mind  that  it 
referred  more  particularly  to  the  freight  going  east. 

Senator  MORGAN.  And  the  agreement  is  on  all  the  lines  you  have 
mentioned. 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  That  agreement  gave,  you  say,  to  the  Canadian 
Pacific  a  lowepor  differential  rate? 

Mr.  HUNTINGTON.  Yes;  the  Canadian  Pacific  had  a  lower  rate.  I  do 
not  think  that  that  company  was  always  in  the  agreement.  Sometimes, 
I  think,  it  was  running  wild. 

Senator  MORGAN.  By  a  lower  rate,  do  you  mean  a  lower  percentage, 
or  a  lower  freight  rate  ? 

Mr.  HUNTINGTON.  I  mean  a  lower  price  for  handling  the  business. 

Senator  MORGAN.  The  Canadian  Pacific  had  a  right  to  charge  a  less 
price  per  mile  for  freight  and  passengers? 

Mr.  HUNTINGTON.  I  think  it  had  a  right  to  charge  a  less  price  from 
Chicago  to  San  Francisco.  On  account  of  the  greater  mileage  of  that 
company  it  had  a  right  to  charge  a  lesser  rate,  so  as  to  get  its  share  of 
the  business. 

Senator  MORGAN.  When  was  that  common  agreement  first  entered 
into? 

Mr.  HUNTINGTON.  I  think  there  have  been  several  such  agreements 
for  the  last  twenty- five  years. 

Senator  MORGAN.  You  began  it  twenty-five  years  ago ! 
PR 20 


306  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  can  not  say  it  was  just  twenty-live  years  ago, 
but  it  lias  been  done  more  than  once. 

Senator  MORGAN.  Up  to  what  time  was  it  continued;  when  was  it 
ended? 

Mr.  PIUNTINGTON.  I  do  not  know  but  that  it  is  in  force  now. 

Senator  MORGAN.  You  have  not  been  notified  of  its  being  ended? 

Mr.  HUNTINGTON.  I  would  not  naturally  be  notified  of  it.  The  traffic 
department  attends  to  such  matters. 

Senator  MORGAN.  You  are  the  vice  president  of  the  Central  Pacific 
Company,  and  have  been  all  the  time  from  its  first  organization? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  have  been  the  principal  business  agent 
of  the  company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  were  also  president  of  the  Kentucky 
corporation  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  the  Kentucky  Company  has,  either  by  opera- 
tion or  by  lease,  controlled  all  the  railroads  from  Portland,  Greg.,  to 
New  Orleans? 

Mr.  HUNTINGTON.  I  do  not  know  that  it  has  controlled  them  all. 
It  has  controlled  a  large  majority  of  them. 

Senator  MORGAN.  Is  there  any  gap  which  anybody  else  owns  in 
that  line  except  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  do  not  think  that  the  Southern  Pacific  owns 
the  California  Pacific.  I  am  pretty  sure  it  does  not. 

Senator  MORGAN.  But  the  Southern  Pacific  controls  the  California 
Pacific? 

Mr.  HUNTINGTON.  I  am  very  sure  it  does  not. 

Senator  MORGAN.  It  neither  owns  nor  controls  it? 

Mr.  HUNTINGTON.  It  may  have  a  traffic  arrangement  with  it. 

Senator  MORGAN.  Who  does  own  it? 

Mr.  HUNTINGTON.  I  do  not  know;  there  are  quite  a  great  number 
of  shareholders. 

Senator  MORGAN.  Who  are  the  principal  shareholders  in  the  Cali- 
fornia Pacific? 

Mr.  HUNTINGTON.  I  think  that  Mr.  Searles,  Mr.  Hubbard,  Mr.  Still- 
man,  Mr.  Charles  F.  Crocker,  Mr.  George  Crocker,  Mr.  William  Crocker, 
Mr.  Stanford,  and  myself  were  the  principal  owners.  • 

Senator  MORGAN.  How  much  did  you  yourself  own  in  it? 

Mr.  HUNTINGTON.  I  do  not  know  how  much. 

Senator  MORGAN.  About  how  much? 

Mr.  HUNTINGTON.  I  think  in  the  neighborhood  of  one-fifth  or 
one- sixth. 

Senator  MORGAN.  How  much  does  the  Stanford  estate  own  in  it? 

Mr.  HUNTINGTON.  My  impression  is,  about  the  same. 

Senator  MORGAN.  How  much  does  the  Colton  estate  own  in  it? 

Mr.  HUNTINGTON.  Colton  is  dead. 

Senator  MORGAN.  But  the  estate? 

Mr.  HUNTINGTON.  The  estate  is  divided. 

Senator  MORGAN.  Well,  Mr.  Col  ton's  successor? 

Mr.  HUNTINGTON.  I  do  not  know;  but  my  impression  is,  not  any. 

Senator  MORGAN.  How  much  does  the  Hopkins  estate  own? 

Mr.  HUNTINGTON.  That  estate  is  settled  up.  I  do  not  know;  I  think 
about  the  jsame. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  307 

Senator  MORGAN.  That  amounts  to  three-fifths  of  this  California 
Pacific  that  you  know  of  ? 

Mr.  HUNTINGTON.  I  am  not  quite  positive,  but  I  am  sure  it  is  more 
than  one-half. 

Senator  MORGAN.  At  all  events  it  is  the  controlling  interest? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Owning  that  controlling  interest,  what  have  you 
done  with  the  California  Pacific?  Have  you  put  it  into  the  Kentucky 
Company  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Not  at  all;  you  kept  it  out? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  So  that  three  of  you  own  three-fifths  of  the  inter- 
mediate line  between  Portland  and  New  Orleans,  called  the  California 
Pacific  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  long  is  that  line? 

Mr.  HUNTINGTON.  One  hundred  and  twenty-five  miles. 

Senator  MORGAN.  What  are  its  terminal  points! 

Mr.  HUNTINGTON.  Knights  Landing,  on  the  Sacramento.  There  is 
a  branch  of  it  to  Woodland,  Calistoga,  and  Vallejo. 

Senator  MORGAN.  What  lines  connect  with  your  trunk  line  from 
Portland  to  New  Orleans  ? 

Mr.  HUNTINGTON.  The  San  Francisco  Northern  owns  from  Tehama 
down.  They  run  in,  a  little  distance  on  the  California  Pacific,  from 
Davisville. 

Senator  MORGAN.  I  want  to  know  where  this  California  Pacific 
becomes  a  part  of  the  main  trunk  line  leading  from  Portland,  Oreg.,  to 
New  Orleans? 

Mr.  HUNTINGTON.  At  Sacramento. 

Senator  MORGAN.  That  is  the  northern  point? 

Mr.  HUNTINGTON.  That  is  where  they  connect. 

Senator  MORGAN.  Where  is  the  southern  point  of  connection? 

Mr.  HUNTINGTON.  I  think  it  is  at  Suisun. 

Senator  MORGAN.  Is  this  California  Pacific  under  the  control  of  the 
Kentucky  Company? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Is  it  leased  by  the  Kentucky  Company  1 

Mr.  HUNTINGTON.  I  am  inclined  to  think  that  it  is. 

Senator  MORGAN.  Do  you  not  know  that  it  is? 

Mr.  HUNTINGTON.  I  am  pretty  certain  that  it  is. 

Senator  MORGAN.  You  are  the  president  of  the  Kentucky  Company. 
Do  you  not  know  whether  you  have  leased  this  California  Pacific  Com- 
pany, or  not? 

Mr.  HUNTINGTON.  I  think  we  have. 

Senator  MORGAN.  Do  you  not  know  that  you  have? 

Mr.  HUNTINGTON.  I  am  not  quite  positive. 

Senator  MORGAN.  If  you  have  not  leased  it,  who  has  ? 

Mr.  HUNTINGTON.  Nobody.  I  am  not  the  president  of  the  California 
Pacific  Company. 

Senator  MORGAN.  But  you  are  the  president  of  the  other  company? 

Mr.  HUNTINGTON.  Yes;  I  am  president  of  the  Southern  Pacific. 

Senator  MORGAN.  If  the  California  Pacific  is  leased  to  the  Southern 
Pacific  by  somebody,  by  whom  is  it  leased  ? 

Mr.  HUNTINGTON.  It  may  be  by  Mr.  Charles  Crocker.  He  is  the  vice- 
president  and  might  sign  the  lease  without  my  knowing  it. 


308  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  You  really  do  know  that  this  California  Pacific  is 
leased  to  the  Kentucky  Company — the  Southern  Pacific? 

Mr.  HUNTINGDON.  My  impression  is  that  it  is.  I  never  saw  the  lease ; 
I  had  nothing  to  do  with  it. 

Senator  MORGAN.  Having  got  that  kink  out  of  the  yarn,  I  want  to 
know  whether  this  whole  line  from  New  Orleans  to  Portland,  Oreg., 
was  put  into  this  agreement,  which  I  call  a  pool  agreement? 

Mr.  HUNTINGDON.  No ;  my  impression  is  that  it  was  only  to  Sail  Fran- 
cisco— from  Ogden  or  Chicago  to  San  Francisco. 

Senator  MORGAN.  Was  the  part  of  the  line  between  San  Francisco 
and  Portland,  Oreg.,  left  out  of  the  agreement? 

Mr.  HUNTINGTON.   No. 

Senator  MORGAN.  Then  it  is  included- in  it? 

Mr.  HUNTINGTON.  I  do  not  think  that  it  was  in .  It  was  not  necessa- 
rily in.  Most  likely  it  was  in.  But  there  were  two  steamer  lines  running 
between  the  upper  waters  of  Oregon  and  Washington  and  San  Francisco. 

Senator  MORGAN.  Competing  lines? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  One  of  them  owned  by  the  Central  Pacific? 

Mr.  HUNTINGTON.  No;  neither  of  them. 

Senator  MORGAN.  Or  by  the  Southern  Pacific? 

Mr.  HUNTINGTON.  No;  neither  of  them. 

Senator  MORGAN.  They  are  independent  lines,  are  they? 

Mr.  HUNTINGTON.  I  think  one  of  them  is  controlled  largely  by  the 
Canadian  Pacific,  and  the  other  by  the  Oregon  Railway  Navigation 
Company. 

Senator  MORGAN.  The  Canadian  Pacific  and  the  Oregon  Navigation 
Company  had  two  competing  lines  running  to  San  Francisco? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  they  were  included  in  this  general  agreement? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  Would  they  include  these  two  competing  steam- 
ship lines,  and  leave  out  the  railroad  line? 

Mr.  HUNTINGTON.  I  am  inclined  to  think  that  the  railroad  line  was  in. 

Senator  MORGAN.  Then  we  have  got  all  in,  including  the  two  com- 
peting water  lines.  The  point  they  start  at  is  San  Francisco,  and  it 
was  from  that  point  that  you  made  the  estimate  of  the  income  of  all  oi 
these  different  roads  and  steamship  lines  before  you  ascertained  that 
the  Central  Pacific  was  entitled  to  more  than  50  per  cent  of  the  net 
income.  Now  you  state  that  this  began  about  twenty-five  years  ago? 

Mr.  HUNTINGTON.  No;  I  said  that  it  might  have  commenced  that 
long  ago.  It  is  a  long  way  back.  All  these  things  generally  come  to 
me  after  they  are  done.  This  may  have  come  to  me  for  confirmation; 
but  I  trust  largely  to  the  men  having  charge  of  these  matters. 

Senator  MORGAN.  I  am  quoting  not  guesses  but  statements  of  fact 
which  you  make  in  an  equivocal  way.  I  would  like  you  to  get  as  near 
the  facts  as  you  can. 

Mr.  HUNTINGTON.  Yes;  I  would  like  to  give  you  all  the  facts. 

Senator  MORGAN.  Did  it  commence  twenty-five  years  ago? 

Mr.  HUNTINGTON.  Yes ;  I  think  it  was  as  early  as  1871  we  had  an 
arrangement. 

Senator  MORGAN.  And  it  is  going  on  yet? 

Mr.  HUNTINGTON.  I  can  not  say.  There  have  been  breaks  in  it. 
Whether  it  is  going  on  to-day  or  not  I  do  not  know. 

Senator  MORGAN.  You  are  the  president  of  one  of  these  great  lines 
and  the  vice-president  of  another  of  these  great  lines,  and,  if  there 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  309 

should  be  any  break  in  the  arrangement,  would  you  not  have  knowl- 
edge of  it? 

Mr.  HUNTINGTON.  Not  necessarily.  These  agreements  have  certain 
times  to  run;  and  the  times  run  on.  I  have  able  men  doing  this  busi- 
ness, who  know  all  about  it  much  better  than  I  can  know.  I  could  not 
sit  down  and  make  an  agreement  of  that  kind.  I  would  not  know  how 
to  do  it.  But  Mr.  Stubbs,  the  head  of  our  traffic  department,  meets  the 
heads  of  traffic  departments  of  other  lines,  and  they  agree  to  what 
would  be  a  fair  division. 

Senator  MORGAN.  Do  they  submit  their  agreement  for  your  ratifica- 
tion? 

Mr.  HUNTINGDON.  I  do  not  know ;  they  may. 

Senator  MORGAN.  Do  you  not  know  that  they  did  I 

Mr.  HUNTINGTON.  No;  I  do  not. 

Senator  MORGAN.  Did  they  not  inform  you  of  what  they  did? 

Mr.  HUNTINGTON.  Probably  they  did.  Mr.  Stubbs  has  been  with  us 
for  twenty- six  years,  and  he  knows  his  part  of  the  business  a  great  d  al 
better  than  I  know  it. 

Senator  MORGAN.  Does  he  manage  the  business  independently  of 
you? 

Mr.  HUNTINGTON.  No;  not  independently  of  me.  I  have  the  last 
say;  but  if  he  did  not  know  how  to  do  the  business  better  than  I,  he 
would  be  the  wrong  man  in  the  place. 

Senator  MORGAN.  How  can  you  have  the  last  say  if  he  does  not 
report  the  agreements  to  you? 

Mr.  HUNTINGTON.  He  probably  does ;  but  I  would  be  very  likely  to 
say  to  him,  "Do  what  you  think  right  in  the  matter." 

Senator  MORGAN.  Then  the  power  behind  the  throne  would  be  greater 
than  the  throne  itself? 

Mr.  HUNTINGTON.  Yes;  in  certain  details. 

Senator  MORGAN.  Well,  you  know,  Mr.  Huntington,  whether,  in 
regard  to  these  immensely  important  matters,  they  did  submit  the 
agreement  to  you  or  not? 

Mr.  HUNTINGTON.  Not  necessarily,  in  all  its  details. 

Senator  MORGAN.  That  was  not  my  question.  I  want  to  know 
whether  you  know  that  the  agreement  was  submitted  to  you. 

Mr.  HUNTINGTON.  In  the  main,  I  suppose  I  knew  what  the  agree- 
ment was. 

Senator  MORGAN.  If  any  change  was  made  in  the  agreement  did  you 
not  know  it? 

Mr.  HUNTINGTON.  I  think  there  might  have  been  changes  made  of 
which  I  did  not  know.  I  think  that  if  there  was  any  radical  change 
or  any  new  thing  they  would  have  advised  me  of  it. 

Senator  MORGAN.  Have  these  percentages  in  favor  of  the  Central 
Pacific  been  increased  or  decreased  within  the  last  twenty-five  years; 
and  if  so,  why? 

Mr.  HUNTINGTON.  I  can  not  say  why.  The  percentage  might  have 
been  made  more  or  made  less.  The  traffic  department  may  have  made 
changes. 

Senator  MORGAN.  With  your  consent? 

Mr.  HUNTINGTON.  I  did  not  consent  or  dissent? 

Senator  MORGAN.  About  how  often  were  these  rearrangements  of 
rates  made  ? 

Mr.  HUNTINGTON.  I  can  not  say.  This  thing  is  growing  all  the 
time.  Companies  cut  rates,  and  they  cut  and  cut,  and  they  become 
demoralized  and  then  they  get  together  again. 


310  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Is  there  no  agreement  for  an  annual  readjustment 
of  rates  ? 

Mr.  HUNTINGDON.  I  do  not  think  there  is. 

Senator  MORGAN.  At  the  time  that  the  Interstate  Commerce  Com- 
mission was  created  that  law  gave  to  the  Canadian  Pacific  a  great 
advantage,  did  it  not? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  got  the  Canadian  Pacific  in  in  order  to 
break  down  that  competition1? 

Mr.  HUNTINGTON.  No;  I  think  the  Canadian  Pacific  was  in  before 
the  interstate  commerce  law  went  into  effect. 

Senator  MORGAN.  But  you  say  the  agreement  was  changed  from  time 
to  time1? 

Mr.  HUNTINGTON.  Yes ;  I  believe  that  the  interstate  commerce  law 
is  construed  now  so  that  it  does  not  make  any  difference  in  competition. 

Senator  MORGAN.  As  it  was  construed  then  did  it  make  a  difference? 

Mr.  HUNTINGTON.  Yes;  but  the  Canadian  Pacific  only  came  in  com- 
petition with  the  ocean  lines.  The  ship  line  is  by  Cape  Horn,  by  which 
the  cheap  and  heavy  tonnage  is  sent  when  time  is  no  special  object. 
The  Cape  Horn  route  is  very  hard  to  compete  with. 

Senator  MORGAN.  As  to  this  50  per  cent  or  over,  which  you  speak  of, 
in  favor  of  the  Central  Pacific  for  freights  going  east  or  going  west 
under  this  combination  or  agreement,  was  there  any  agreement  or 
understanding  between  the  Central  Pacific  and  the  Kentucky  company, 
the  Southern  Pacific,  as  to  how  the  two  companies  should  divide  the 
freights? 

Mr.  HUNTINGTON.  I  do  not  know  whether  there  was  or  not,  but  I 
expect  there  was. 

Senator  MORGAN.  What  part  of  it  did  the  Southern  Pacific  get  and 
what  part  the  Central  Pacific  ? 

Mr.  HUNTINGTON.  That  is  in  my  testimony  before  the  United  States 
Pacific  Railroad  Commission.  I  looked  that  up  at  the  time.  The 
Southern  Pacific  got  20  per  cent  of  the  business. 

Senator  MORGAN.  Twenty  per  cent  of  the  50  per  cent? 

Mr.  HUNTINGTON.  No;  it  did  not  get  any  of  that.  That  was  all  to 
the  Central  Pacific. 

Senator  MORGAN.  Did  the  Southern  Pacific  get  none  of  the  percent- 
age awarded  to  the  Central  Pacific? 

Mr.  HUNTINGTON.  It  got  whatever  the  fraction  may  have  been 
between  Sacramento  and  San  Francisco. 

Senator  MORGAN.  Only  that? 

Mr.  HUNTINGTON.  Only  that.  I  do  not  know  why  it  could  have  got 
anything  else.  The  ferry  across  the  Straits  of  Benicia  was  out  of  repair 
for  a  couple  of  months,  but  the  railroad  could  run  by  way  of  Tracy,  and 
that  did  not  make  any  difference,  I  suppose.  I  wish  to  say  about  this 
20  per  cent  that  I  mentioned  that  for  a  considerable  part  of  it,  the 
Southern  Pacific  was  taking  low-priced  freights  which  we  took  from 
the  Cape  Horn  route,  and  which  other  roads  did  not  compete  for. 

Senator  MORGAN.  I  wish  you  would  explain  about  that  20  per  cent. 

Mr.  HUNTINGTON.  The  20  per  cent  was  on  the  overland  business. 
Where  it  divides,  I  can  not  tell  you.  It  was  20  per  cent  of  this  trans- 
continental business,  which  goes  largely  by  steamer  from  New  York  to 
New  Orleans.  But  a  considerable  percentage  of  that  (I  think  25  per 
cent  of  that  20  per  cent)  is  taken  from  business  done  by  the  Cape  Horn 
route,  and  at  very  low  rates. 

Senator  MORGAN.  Do  I  understand  you  now  that,  under  this  general 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  311 

agreement  of  all  these  companies,  there  was  awarded  to  the  Central 
Pacific  more  than  50  per  cent  of  the  business? 

Mr.  HUNTINGTON.  I  think  that  all  the  time  they  shared  with  these 
other  companies,  the  Central  Pacific  took  its  pro  rataj  but  I  think  it 
was  more  than  50  per  cent  of  the  whole. 

Senator  MORGAN.  That  was  because  the  Central  Pacific  was  able  to 
earn  that  per  cent  of  the  business,  I  suppose"? 

Mr.  HUNTINGDON.  I  suppose  so. 

Senator  MORGAN.  It  was  not  given  as  a  gratuity? 

Mr.  HUNTINGTON.  I  should  think  not. 

Senator  MORGAN.  There  was  no  benevolence  or  charity  in  it? 

Mr.  HUNTINGTON.  I  think  not.  We  never  had  money  enough  to  be 
liberal  with;  but  we  had  enough  to  be  just. 

Senator  MORGAN.  I  want  to  know,  under  that  arrangement,  or  under 
any  other  arrangement  that  you  made,  or  that  your  Southern  Pacific 
Company  made,  with  the  Central  Pacific,  what  were  the  rates  or 
charges  for  freight  which  the  Southern  Pacific  got  between  Mqjave 
and  San  Francisco,  or  to  its  connection  with  the  Central  Pacific? 

Mr.  HUNTINGTON.  I  can  not  say  what  the  rates  were.  Our  rates 
last  year  (1895)  were  really  less  on  the  whole  line  than  2  cents  a  mile 
for  passengers.  I  can  not  tell  what  the  rate  was  on  any  piece  of  the 
road,  but  the  average  rate  was  about  1.97. 

Senator  MORGAN.  On  what? 

Mr.  HUNTINGTON.  On  all  the  lines  of  the  Central  Pacific  and  the 
Southern  Pacific — on  all  the  lines  that  we  control.  The  rate  per  pas- 
senger was  a  little  less  than  2  cents  a  mile. 

Senator  MORGAN.  How  much  was  the  freight? 

Mr.  HUNTINGTON.  A  little  less  lhan  12  mills  per  ton  per  mile. 

Senator  MORGAN.  On  the  whole  line? 

Mr.  HUNTINGTON.  On  the  overland  part  of  it.  The  rate  on  all  the 
tonnage  was  a  little  less  than  12  mills  per  ton  per  mile. 

Senator  MORGAN.  I  do  not  understand  what  you  mean  about  the 
overland  business. 

Mr.  HUNTINGTON.  I  mean  the  transcontinental  business. 

The  CHAIRMAN.  Are  your  local  rates  to  California  a  little  less  than 
2  cents  a  mile  per  passenger? 

Mr.  HUNTINGTON.  On  all  the  lines  the  average  is  less  than  2  cents 
a  mile. 

The  CHAIRMAN.  Is  that  as  low  as  the  general  average  for  passengers 
in  the  United  States  ? 

Mr.  HUNTINGTON.  I  think  it  is.  I  go  into  New  England  occasionally 
and  no  rates  up  there  are  as  low  as  those.  I  do  not  think  there  are 
any  lines  in  the  United  States  which  have  rates  so  low  under  the  cir- 
cumstances. 

The  CHAIRMAN.  In  other  words,  you  think  that  railroad  passengers 
in  California  and  on  the  Pacific  Coast  generally,  are  carried  as  cheaply 
as  they  are  in  the  United  States,  as  a  general  average? 

Mr.  HUNTINGTON.  I  believe  so.  I  believe  they  are  the  best  accom- 
modated people  in  the  world  by  rail.  I  have  traveled  pretty  much  over 
Western  Europe,  and  I  do  not  know  any  place  there  where  railroad 
travel  is  as  cheap  as  on  our  road,  while  the  expenses  of  operating  rail- 
roads in  Europe  are  not  nearly  as  much  as  they  are  here.  Coal  with 
us  cost  four  times  as  much  as  it  costs  in  England. 

Senator  MORGAN.  You  own  coal  mines,  do  you  not? 

Mr.  HUNTINGTON.  We  own  some  coal  mines,  but  they  do  not  any- 
thing like  supply  the  roads  with  coal. 


312  GOVERNMENT    DEBT    OF   THE   PACIFIC    RAILROADS. 

Senator  MORGAN.  What  percentage  of  the  coal  used  on  your  rail- 
roads do  your  coal  mines  supply? 

Mr.  HUNTINGTON.  I  do  not  know;  I  presume  one-half  of  it.  It  may 
be  more. 

Senator  MORGAN.  Then  you  are  selling  your  coal  pretty  high  to 
these  railroad  companies? 

Mr.  HUNTINGTON.  No;  I  think  we  are  selling  coal  at  less  than  one- 
half  than  it  is  being  sold  for  in  San  Francisco. 

Senator  MORGAN.  Where  do  you  deliver  the  coal  which  you  supply 
to  the  railroad  companies f 

Mr.  HUNTINGTON.  At  Benicia,  Port  Costa,  and  Oakland. 

Senator  MORGAN.  How  much  haulage  is  there  from  the  mines  to  the 
railroad  ? 

Mr.  HUNTINGTON.  We  are  interested  in  the  Oammack  mines  in  Van- 
couver. The  haul  is  about  1,000  miles  to  where  we  deliver  the  coal. 
We  deliver  it  at  Oakland  pier.  We  carry  quite  many  thousand  tons 
there.  We  have  coal  bunkers  there  which  carry,  I  presume,  20,000 
tons;  and  at  Los  Angeles  we  have  bunkers  which  carry  10,000  tons. 
The  ships  come  there  and  deliver  the  coal  to  the  railroad. 

Senator  MORGAN.  How  far  is  this  Cammack  mine  from  Portland, 
Oreg.  ? 

Mr.  HUNTINGTON.  It  is  in  the  Gulf  of  Georgia;  I  should  say  about 
300  or  400  miles. 

Senator  MORGAN.  Is  the  coal  brought  by  water  or  by  rail? 
-Mr.  HUNTINGTON.  By  water. 

Senator  MORGAN.  When  you  get  it  to  Portland,  Oreg.,  you  deliver  it 
to  your  own  road? 

Mr.  HUNTINGTON.  I  think  we  buy  our  coal  at  Portland  from  dealers. 

Senator  MORGAN.  Where  do  you  send  that  coal  from  Oammack? 

Mr.  IIuNTiNGTON.  To  Benicia,  Oakland,  and  Los  Angeles. 

Senator  MORGAN.  All  the  way  from  Portland,  Oreg.,  you  haul  it  on 
your  own  road? 

Mr.  HUNTINGTON.  No;  we  do  not  deliver  any  coal  at  Portland. 

Senator  MORGAN.  Do  you  deliver  it  at  San  Francisco? 

Mr.  HUNTINGTON.  We  deliver  it  at  Oakland. 

Senator  MORGAN.  How  do  you  deliver  it  at  Oakland? 

Mr.  HUNTINGTON.  By  ships. 

Senator  MORGAN.  Which  bring  it  from  Cammack? 

Mr.  HUNTINGTON.  Yes,  and  from  Tacoma. 

Senator  MORGAN.  Does  the  railroad  company  own  those  ships? 

Mr.  HUNTINGTON.  I  think  so;  I  am  not  certain. 

Senator  MORGAN.  And  from  there  it  is  distributed  at  various  points 
on  the  railroad  lines? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  It  is  hauled  and  distributed  over  the  line  wherever 
you  want  to  use  it? 

Mr.  HUNTTNGTON.  Yes. 

Senator  MORGAN.  How  far  south  do  you  have  to  go  to  get  access  to 
another  coal  mine? 

Mr.  HUNTINGTON.  We  buy  coal  from  the  Atchison  Company  at 
Derning. 

Senator  MORGAN.  Have  you  no  coal  mine  of  your  own  except  Cam- 
mack? 

Mr.  HUNTINGTON.  We  have  one  in  Oregon  at  Carbon  Hill. 

Senator  MORGAN.  And  you  have  no  other  between  Portland  and  Ncv 
Orleans? 


GOVERNMENT    DEBT   OF   THE   PACIFIC    RAILROADS.  313 

Mr.  HUNTINGDON .  No;  I  think  not. 

Senator  MORGAN.  So  that,  whatever  coal  you  do  not  buy,  you  supply 
the  railroad  with  from  your  mines  at  Cammack  and  Carbon  Hill? 

Mr.  HUNTINGTON.  Yes;  we  buy  coal  also.  I  should  not  wonder  if 
we  bought  a  million  tons  of  coal  from  Australia  and  England  since  we 
have  been  running  the  Central  Pacific  road. 

Senator  MORGAN.  Did  you  do  so  because  that  coal  was  cheaper? 

Mr.  HUNTINGTON.  Yes.  Whenever  we  can  beat  them  down  in  prices 
we  do  it. 

Senator  MORGAN.  Do  you  know  what  a  ton  of  coal  costs  you  at  the 
mouth  of  the  mines  at  Cammack  or  Carbon  Hill? 

Mr.  HUNTINGTON.  I  think  the  cost  is  $2.35  a  ton. 

Senator  MORGAN.  At  the  mouth  of  the  mine? 

Mr.  HUNTINGTON.  At  the  end  of  the  rail  from  the  mine,  12  miles. 

Senator  MORGAN.  Where  you  strike  water  transportation? 

Mr.  HUNTINGTON.  Yes;  and  then  there  is  40  cents  a  ton  duty  for 
bringing  it  into  the  United  States. 

Senator  MORGAN.  Then  you  get  your  coal  for  $2.35  at  the  mines, 
and  you  pay  40  cents  a  ton  duty  on  it,  and  that  is  what  it  costs  you? 

Mr.  HUNTINGTON.  That  is  what  is  in  my  mind. 

Senator  MORGAN.  The  balance  of  the  cost  is  transportation  and 
handling. 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Of  course,  when  you  have  to  load  the  coal  on  trains, 
you  have  to  break  bulk. 

Mr.  HUNTINGTON.  We  put  the  coal  into  coal  bunkers  and  the  rail- 
road company  takes  it  up  there. 

Senator  MORGAN.  You  can  not  afford  to  haul  your  coal,  at  that  cost 
for  mining  and  transportation,  as  far  south  and  southeast  as  New 
Orleans? 

Mr.  HUNTINGTON.  Oh,  no;  we  can  not. 

Senator  MORGAN.  Why  not? 

Mr.  HUNTINGTON.  The  transportation  of  it,  even  at  half  a  cent  a  mile 
per  ton,  would  amount  to  $12.50  a  ton  at  New  Orleans.  When  we  can 
buy  coal  at  New  Orleans  we  would  never  think  of  hauling  that  coal 
there. 

Senator  MORGAN.  You  could  carry  it  half  way  to  New  Orleans  at  a 
quarter  of  a  cent  a  ton  ? 

Mr.  HUNTINGTON.  We  could  not  and  live. 

Senator  MORGAN.  Do  I  understand  you  to  say  that  a  half  a  cent  a 
ton  would  be  the  cost  of  transportation? 

Mr.  HUNTINGTON.  I  say  that  to  transport  coal  to  New  Orleans  at 
half  a  cent  a  ton  would  make  the  freight  $12.50  a  ton. 

Senator  MORGAN.  Would  it  cost  that  much  to  put  the  coal  in  there? 

Mr.  HUNTINGTON.  No;  I  don't  suppose  it  would  cost  that  much. 

Senator  MORGAN.  So  that  your  testimony  is  that  after  you  got  the 
coal  to  Sacramento  you  could  not  afford  to  haul  it  on  your  own  road  to 
supply  your  own  engines? 

Mr.  HUNTINGTON.  We  could  afford  to  haul  it  a  certain  distance,  but 
not  to  haul  it  over  the  Sierra  Madre  Mountains.  We  buy  coal  east  of 
the  Sierra  Madre  from  the  Denver  and  Eio  Grande  people. 

Senator  MORGAN.  You  haul  the  coal  until  you  can  get  coal  at  a  cheaper 
market,  and  then  you  buy  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Then,  this  coal  problem  does  not  protect  you  any 
more  than  it  does  the  Central  Pacific  ? 


314  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTING-TON.  I  do  not  understand  your  question,  Senator. 
Senator  MORGAN.  Does  the  Central  Pacific  have  advantages  over  the 
Southern  Pacific  in  the  way  of  obtaining  coal? 

Mr.  HUNTTNGTON,   No. 

Senator  MORGAN.  Does  it  have  to  pay  as  much  as  the  Central  Pacific 
does? 

Mr.  HUNTTNGTON.  The  two  companies  pay  just  the  same. 

Senator  MORGAN.  So  that  there  is  no  difference  in  that? 

Mr.  HUNTING-TON.  I  should  not  say  there  was. 

The  CHAIRMAN.  What  percentage  of  the  coal  that  is  used  on  the 
Central  Pacific  do  you  buy  at  the  eastern  terminus  of  the  road — Ogden? 

Mr.  HUNTTNGTON.  I  do  not  know. 

The  CHAIRMAN.  About  how  much? 

Mr.  HUNTINGTON.  It  is  but  a  small  part  of  it. 

The  CHAIRMAN.  The  coal  which  you  use  on  the  eastern  portion  of 
the  road  between  the  Sierras  and  Ogden  you  buy  at  Ogdenf 

Mr.  HUNTTNGTON.  Yes. 

The  CHAIRMAN.  And  the  coal  which  you  use  west  of  the  Sierra 
Nevadas  you  furnish  from  your  mines? 

Mr.  HUNTINGTON.  Yes. 

The  CHAIRMAN.  What  percentage  of  the  road  is  that;  is  it  as  much 
as  one-half? 

Mr.  HUNTINGTON.  A  good  deal  more  than  one- half.  I  have  been 
working  down  the  price  of  coal. 

The  CHAIRMAN.  Do  you  pay  more  for  coal  at  Ogden  than  you  pay  at 
the  seacoast? 

Mr.  HUNTINGTON.  ]STo;  we  pay  more  at  the  seacoast.  The  coal  at 
Ogden  costs  us  very  little  more  than  it  costs  at  the  Cammack  mine; 
not  so  much. 

The  CHAIRMAN.  Where  does  the  coal  which  you  buy  at  the  east 
come  from  ? 

Mr.  HUNTINGTON.  Somewhere  back  of  the  mountains  east  of  Salt 
Lake.  We  have  some  coal  mines  (the  Rocky  Mountain  Coal  Mine 
Company  has)  at  Evanstou. 

(Mr.  Payson,  counsel  for  the  Central  Pacific,  said  that  he  would 
submit  a  tabulated  statement  as  to  the  coal.) 

Senator  MORGAN.  I  would  like  to  have  somebody  swear  to  it  before 
it  goes  into  the  record.  I  do  not  care  about  voluntary  statements. 

(Mr.  H.  E.  Huntington  was  sworn  as  to  the  correctness  of  the  table 
which  he  would  submit,  and  was  directed  to  state  in  the  table  what 
other  corporations  in  San  Francisco  paid  for  coal.) 

Senator  MORGAN.  1  am  interested  in  trying  to  get  an  explanation 
about  this  allowance  of  more  than  50  per  cent  to  the  Central  Pacific 
Railroad  Company.  I  think  you  have  already  stated,  Mr.  Huntington 
(I  know  you  have),  that  the  Central  Pacific  Company  would  not  have 
been  entitled  to  it  unless  it  could  earn  it  and  did  earn  it. 

Mr  HUNTTNGTON.  I  do  not  know  any  other  reason  why  it  should  be 
given  to  the  Central  Pacific  unless  it  could  earn  it. 

Senator  MORGAN.  Therefore  the  Central  Pacific  Company  can  earn 
more  than  any  of  the  roads  you  have  mentioned,  if  it  gets  more  than 
50  per  cent  of  the  business.  In  other  words,  it  is  a  more  profitable  road 
than  any  of  the  others? 

Mr.  HUNTINGTON.  I  should  say  that  would  be  the  natural  outcome. 

Senator  STEWART.  That  is,  so  far  as  the  through  business  is  con- 
cerned ? 

Mr.  HUNTINGTON.  Yes;  of  course  there  is  no  local  business  on  the 
Central  Pacific. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  315 


Senator  MORGAN.  Mr.  Huntington  did  not  qualify  it  in  that  way. 

Senator  STEWART.  Well,  I  should  like  to  inquire  as  to  that. 

Mr.  HUNTINGTON.  So  far  as  the  through  business  is  concerned  there 
is  hardly  any  local  business  on  600  miles  of  the  Central  Pacific. 

The  CHAIRMAN.  Was  this  allowance  made  to  the  Central  Pacific 
because  it  is  a  shorter  line  than  the* other  transcontinental  lines! 

Mr.  HUNTINGTON.  Yes;  and  it  runs  to  the  great  central  points  of 
business. 

Senator  MORGAN.  Now,  we  will  get  to  the  local  business  and  also  to 
the  through  business  which  you  send  from  the  Southern  Pacific  over 
the  Central  Pacific  to  the  east.  Is  there  110  agreement  and  has  there 
been  no  agreement  between  the  Southern  Pacific  and  the  Central 
Pacific  as  to  a  division  of  that  freight  which  is  forced  by  the  Southern 
Pacific  to  the  Central  Pacific? 

Mr.  HUNTINGDON.  I  do  not  think  that  that  is  a  proper  way  to  state 
it.  The  Central  Pacific  takes  freight  at  San  Francisco,  and  I  suppose 
the  division  is  on  the  mileage.  The  Atchison  people  go  into  California, 
and  into  San  Francisco,  and  make  rates  the  same  as  we  do;  but  the 
Southern  Pacific  has  no  more  to  do  with  it  than  the  New  York  Central 
has. 

Senator  MORGAN.  I  am  not  talking  about  the  Atchison  and  Santa 
Fe,  but  about  the  Central  Pacific.  You  had  a  separate  agreement 
between  the  Central  Pacific  and  the  Southern  Pacific  for  the  rates  of 
freights  and  for  the  division  of  freights  coming  over  the  Southern 
Pacific  to  the  Central  Pacific,  east  or  west,  whether  they  came  from  that 
direction  or  from  the  direction  of  Mojave.  I  want  to  know  what  that 
agreement  was. 

Mr.  HUNTINGTON.  There  was  no  agreement  except  as  to  the  division 
of  mileage.  I  do  not  know  myself  how  that  is. 

Senator  MORGAN.  Did  not  the  Central  Pacific  pay  per  mile  more 
than  the  Southern  Pacific  paid  per  mile  for  the  freight  charges  which 
passed  over  the  Southern  Pacific? 

Mr.  HUNTINGTON.  Oh,  no;  I  am  quite  sure  about  that.  I  do  not 
know,  but  I  am  as  certain  of  that  as  I  am  of  anything,  because  it  would 
not  be  a  natural  thing  to  do.  Whatever  one  did  the  other  did. 

Senator  MORGAN.  Were  not  the  freights  designed  for  southwestern 
California,  as  far  south  as  Mojave  from  New  Orleans,  sent  to  San  Fran- 
cisco for  delivery,  or  were  they  delivered  along  the  line  ? 

Mr.  HUNTINGTON.  I  do  not  understand  you,  Senator. 

Senator  MORGAN.  Did  you  permit  the  trains  that  were  sent  from  New 
Orleans  to  any  point  in  California  north  of  Mojave  to  be  delivered 
there,  or  did  you  require  the  cars  to  go  on  to  San  Francisco? 

Mr.  HUNTINGTON.  If  they  go  on  to  San  Francisco  I  never  heard  of 
it;  I  would  not  suppose  they  did. 

Senator  MORGAN.  Have  there  not  been  complaints  made  to  you 
frequently  by  the  merchants  along  the  line,  that  they  could  only  get 
their  freights  by  paying  twice;  that  is,  by  paying  the  freight  to  San 
Francisco  and  back  from  San  Francisco  to  the  point  of  delivery? 

Mr.  HUNTINGTON.  I  think  not.  They  have  complained  that  we 
charge  more  for  a  short  distance  than  was  charged  to  San  Francisco, 
and  that,  I  have  no  doubt,  is  true. 

Senator  MORGAN.  Was  no  complaint  made  by  the  merchants  at  Los 
Angeles  about  that  practice? 

Mr.  HUNTINGTON.  No;  they  complained,  I  think,  because  we  charged 
more  for  the  shorter  haul  than  for  the  longer  haul;  but  that  we  could 
not  remedy.  The  only  way  for  that  to  be  remedied  would  be  for  them 


316  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS*. 

to  move  to  tide  water,  where  they  would  have  tide-water  competition. 
If  we  did  not  charge  any  more  to  Los  Angeles  than  we  did  to  San 
Francisco  the  company  could  not  live  at  all,  or  it  would  have  to  go  out 
of  the  San  Francisco  business  entirely,  because  ships  by  the  Isthmus 
route  and  by  the  Straits  of  Magellan  and  by  Gape  Horn  would  do  all 
the  business.  In  doing  the  San  Francisco  business,  where  we  come 
in  competition  with  tide-water  business,  we  figure  that  whenever 
we  can  make  anything  over  the  cost  of  the  moving  of  the  train  it  is 
for  our  interest  to  take  the  business.  But,  if  we  charged  the  regular 
rates — rates  that  would  pay  the  train  movement  and  the  fixed  expenses — 
the  company  could  not  do  that  business  at  all.  It  could  not  begin  to 
do  it. 

Senator  MORGAN.  I  am  not  asking  what  the  company  could  do,  but 
what  it  did  do.  Do  you  undertake  to  say  that  the  Southern  Pacific 
Company  has  not  refused  to  deliver  goods  along  that  line,  shipped  from 
New  Orleans  or  from  places  east  of  New  Orleans  to  places  north  of 
Mojave,  until  those  goods  had  first  gone  to  San  Francisco  and  been 
hauled  back? 

Mr.  HUNTINGTON.  I  never  heard  of  it.  I  heard,  as  I  stated  before, 
that  there  were  complaints  that  we  charged  too  much  for  local  rates — 
that  we  charged  more  for  short  hauls  than  for  long  hauls,  as  we  have 
a  right  to  do  under  the  interstate  commerce  law. 

Senator  MORGAN.  If  there  was  such  a  case  as  that,  charging  freight 
to  San  Francisco  and  then  back  again,  the  complaint  was  well-founded. 

Mr.  HUNTINGTON.  I  do  not  think  it  was  done;  and  if  it  was  done, 
there  was  some  good  reason  for  it. 

Senator  MORGAN.  What  good  reason  could  possibly  exist  for  charg- 
ing a  man  double  freight  on  goods  passing  right  by  his  door  going  to 
San  Francisco  and  then  being  hauled  back  again? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Could  there  be  any  good  reason? 

Mr.  HUNTINGTON.  There  could  be. 

Senator  MORGAN.  What  reason  could  there  be? 

Mr.  HUNTINGTON.  When  we  first  started  the  Central  Pacific  road 
there  were  some  complaints.  They  said  we  charged  full  prices  to  San 
Francisco  and  charged  the  local  price  back,  which  made  a  pretty  fair 
rate;  and  they  said  that  if  we  were  going  to  charge  that  rate  we  must 
haul  the  goods  to  San  Francisco  and  then  haul  them  back;  and  I  sup- 
pose that  under  those  circumstances  we  would  do  it.  I  can  not  tell 
anything  else.  We  have  got  to  have  enough  out  of  the  business  to 
pay  the  current  expenses  and  the  fixed  charges. 

Senator  MORGAN.  That  complaint  was  made  when  you  first  started 
in  the  business  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  long  was  it  continued  to  be  made? 

Mr.  HUNTINGTON.  I  have  not  heard  that  complaint  for  a  long  time. 

Senator  MORGAN.  But  the  complaint  has  been  made? 

Mr.  HUNTINGTON.  It  did  not  come  to  me. 

Senator  MORGAN.  Then  how  do  you  know  anything  about  it? 

Mr.  HUNTINGTON.  I  am  talking  about  what  happened  when  we  first 
started  business  on  the  road. 

Senator  MORGAN.  You  knew  it  then? 

Mr.  HUNTINGTON.  Yes;  I  knew  it  then — thirty  years  ago. 

Senator  MORGAN.  When  did  you  drop  that  scheme! 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Did  you  ever  drop  itt 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  317 

Mr.  HUNTINGDON.  I  tliiuk  so.  I  have  not  heard  any  complaint  of  it 
for  years. 

Senator  MORGAN.  Sometimes  men  get  into  such  difficulties  that  they 
are  afraid  to  complain. 

Mr.  HUNTINGTON.  I  do  not  think  that  people  over  there  are  afraid 
to  complain.  Some  few  who  have  nothing  to  ship  are  afraid  of  the 
rates. 

Senator  MORGAN.  And  the  others  can  be  kept  down  because  they  do 
not  dare  to  say  anything? 

Mr.  HUNTINGTON.  Not  that;  but  reasoning  with  them  shows  that  we 
must  have  enough  earnings  to  keep  the  road  running. 

Senator  MORGAN.  I  am  very  much  interested  in  getting  information 
from  you  as  to  when  this  arrangement  stopped,  which  you  have  just 
detailed,  so  as  to  have  it  put  upon  the  record. 

Mr.  HUNTINGTON.  I  can  not  tell.  I  have  not  heard  anything  about 
it  for  twenty  years.  I  think  there  were  probably  some  complaints  of 
that  kind  when  we  first  operated  the  Central  Pacific.  We  charged 
them  at  that  time  probably  a  dollar  a  hundred  for  freight  across  the 
mountains.  I  have  paid,  myself,  $50  a  hundred  for  freight  across 
the  mountains. 

Senator  MORGAN.  You  have  got  a  local  railroad  commission  in  Cali- 
fornia, have  you? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Has  not  that  commission  been  trying  just  such 
questions  as  this? 

Mr.  HUNTINGTON.  No;  I  do  not  think  they  have.  They  pledged 
themselves  before  election  that  they  would  put  down  railroad  rates  25 
per  cent,  and  when  they  were  elected  they  tried  to  do  it.  Now,  we  are 
trying  in  the  courts  whether  they  can  do  it  or  not. 

Senator  MORGAN.  You  deny  the  authority  of  the  State  of  California 
to  do  that? 

Mr.  HUNTINGTON.  I  deny  the  authority  of  anybody  to  take  a  man's 
property  without  consideration. 

Senator  MORGAN.  Was  not  this  particular  complaint  which  I  am  sug- 
gesting to  you  now  put  into  that  suit?  Is  not  that  a  part  of  the  issue — 
that  you  had  made  the  very  arrangement  which  you  have  here  admit- 
ted, and  that  you  kept  it  up  until  the  time  of  filing  that  suit? 

Mr.  HUNTINGTON.  If  it  is,  I  do  not  know  it. 

Senator  MORGAN.  Have  you  never  seen  the  record  in  that  case? 

Mr.  HUNTINGTON.  No;  that  belongs  to  the  legal  department  of  the 
company. 

Senator  MORGAN.  Do  you  not  think  that  that  is  one  of  the  grounds 
of  complaint  against  your  company? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  And  that  that  complaint  continues  up  to  the 
present  time? 

Mr.  HUNTINGTON.  No.  Whatever  the  court  says  about  it  I  suppose 
will  be  final.  We  say  that  they  have  not  any  right  to  confiscate  our 
property,  and  it  is  for  the  courts  to  say  whether  they  have  that  right 
or  not. 

Senator  MORGAN.  But  Congress  has  the  right  to  amend  or  repeal 
your  charter,  and  make  you  do  it. 

Mr.  HUNTINGTON.  I  do  not  think  that  Congress  should  confiscate 
our  property.  I  do  not  believe  it  would. 

Senator  MORGAN.  I  know  that  the  railroad  people  believe  that  they 
are  stronger  than  the  State  government,  but  I  want  to  know  whether 
they  think  themselves  stronger  than  the  United  States  Government. 


318  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  do  not  think  that  Congress  has  the  right  to  con- 
fiscate my  property  or  anybody  else's  property. 

Senator  MORGAN.  What  property  have  you  got  in  the  rates  of 
freight? 

Mr.  HUNTINGTON.  That  is  like  any  other  property. 

Senator  MORGAN.  You  mean  the  absolute  right  to  fix  rates? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  What  right? 

Mr.  HUNTINGTON.  Whenever  we  charge  more  than  would  give  a  fair 
return  for  the  money  invested,  the  courts  may  say  that  we  must  stop 
there. 

Senator  MORGAN.  That  is  what  I  am  trying  to  do. 

Mr.  HUNTINGTON.  That  is  fair  enough,  Senator  Morgan;  but  when 
we  charge  less  than  2  cents  a  mile  for  passengers  and  less  than  12 
mills  a  mile  per  ton  for  freight,  and  when  it  is  proposed  to  cut  those 
rates  25  per  cent,  I  say  that  there  is  no  place  in  the  world  where  a  rail- 
road could  live  at  such  rates. 

Senator  MORGAN.  The  12  mills  a  mile  per  ton  is  not  the  local  rate? 

Mr.  HUNTINGTON.  It  is  the  average  of  all  our  tonnage. 

Senator  MORGAN.  Local  rates  and  all  ? 

Mr.  HUNTINGTON.  The  average  of  all  our  lines  is  less  than  12  mills 
a  mile  per  ton,  so  our  traffic  men  say  j  and  I  have  no  reason  to  doubt 
the  correctness  of  the  statement. 

Senator  MORGAN.  Does  that  include  the  haul  for  the  company? 

Mr.  HUNTINGTON.  I  suppose  it  includes  everything. 

Senator  MORGAN.  You  did  not  make  an  estimate  on  that  haul,  did 
you? 

Mr.  HUNTINGTON.  I  do  not  know  how  the  estimate  is  made  out. 

Senator  MORGAN.  I  suppose  all  this  long  coal  haul  would  be  included 
in  the  estimate? 

Mr.  HUNTINGTON.  I  do  not  know  how  it  is  made  up.  We  are  mov- 
ing coal  on  our  trains,  and  if  we  did  not  charge  the  freight  on  it  there 
would  be  more  expense  for  hauling.  It  would  come  back  on  the  coal 
business  all  the  same.  If  there  is  so  much  out,  there  must  come  so 
much  in. 

Senator  MORGAN.  That  estimate  of  12  mills  per  ton  per  mile  includes 
all  the  movement  of  the  locomotives  on  your  road,  for  short  distances 
or  long  distances,  hauling  trains? 

Mr.  HUNTINGTON.  What  do  you  mean,  Senator? 

Senator  MORGAN.  I  mean  all  the  movement  of  locomotives  hauling 
trains  on  long  distances  or  short  distances.  Your  estimate  includes  the 
movement  of  all  locomotives  hauling  trains. 

Mr.  HUNTINGTON.  It  includes  the  expense  of  hauling  tonnage,  and, 
of  course,  we  haul  it  with  locomotives. 

Senator  MORGAN.  You  mean  tonnage  on  which  you  charge  freights? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  On  which  you  charge  freights  to  the  people? 

Mr.  HUNTINGTON.  I  suppose  to  everybody. 

Senator  MORGAN.  That  would  include  the  movement  of  trains  for 
hauling  materials  for  the  railroad  company,  for  coal,  for  repairs,  for 
the  construction  of  bridges,  and  everything  of  that  sort? 

Mr.  HUNTINGTON.  The  hauling  has  to  be  paid  for. 

Senator  MORGAN.  And  it  includes  all  repair  and  construction  trains 
that  move  over  the  roads.  That  is  the  proper  way  of  bookkeeping,  I 
suppose. 

Mr.  HUNTINGTON.  It  is  the  movement  of  the  tonnage. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  319 

Senator  MORGAN.  And  the  tonnage  is  whatever  you  haul  over  the 
road,  and  it  makes  no  difference  to  whom  it  belongs,  whether  to  the 
railroad  company  or  to  anybody  else  ? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  How  much  would  the  average  be  per  ton  per  mile 
if  you  confined  your  estimate  to  what  you  charge  the  people? 

Mr.  HUNTINGTON.  I  do  not  understand  the  question. 

Senator  MORGAN.  Your  current  income  is  derived  from  charges  on 
freight  and  passengers? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  If  your  estimate  of  the  rates  of  haul  per  ton  per 
mile  were  based  upon  that  income,  then  you  would  know  how  inudi 
the  people  had  to  pay  per  ton  per  mile  for  freight? 

Mr.  HUNTINGTON.  Yes,  I  think  so ;  if  I  understand  your  question. 

Senator  MORGAN.  But  your  estimate  is  not  based  upon  that.  It  is 
based  on  all  the  tonnage  which  you  haul,  whether  on  account  of  the 
company  or  on  account  of  the  people? 

Mr.  HUNTINGTON.  Yes;  the  percentage  of  tonnage  which  we  haul 
for  the  company  is  very  light  in  comparison  with  the  whole  tonnage. 

Senator  MORGAN.  Whether  light  or  not. 

Mr.  HUNTINGTON.  It  is  light  in  comparison  with  the  whole. 

Senator  MORGAN.  How  do  you  know? 

Mr.  HUNTINGTON.  We  burn  a  ton  of  coal  in  60  miles,  I  believe. 

Senator  MORGAN.  Do  you  know  anything  about  the  hauling  of  tim- 
ber and  stone  and  clay  and  ballast  for  construction  and  repairs  on  your 
road? 

Mr.  HUNTINGTON.  That  is  a  small  percentage  of  the  whole  tonnage. 

Senator  MORGAN.  You  said  yesterday  that  the  Western  Develop- 
ment Company  was  continually  building  roads. 

Mr.  HUNTINGTON.  No;  not  the  Western  Development  Company.  I 
said  the  Pacific  Improvement  Company.  I  think  that  the  light  work 
which  we  are  doing  now  is  being  done  by  the  company  itself. 

Senator  MORGAN.  By  what  company? 

Mr.  HUNTINGTON.  By  the  Southern  Pacific  Company. 

Senator  MORGAN.  You  stated  yesterday  that  the  Pacific  Improve- 
ment Company  was  continuing  to  build  railroads  right  along. 

Mr.  HUNTINGTON.  I  think  it  is  building  the  coast  line,  but  I  think 
that  the  Southern  Pacific  is  building  a  number  of  pieces  of  road  which 
the  Pa.cific  Improvement  Company  has  nothing  to  do  with. 

Senator  MORGAN.  Is  all  of  the  haul  for  the  Pacific  Improvement 
Company  included  in  that  estimate?  What  is  the  basis  of  your  cal- 
culation? 

Mr.  HUNTINGTON.  If  the  Pacific  Improvement  Company  builds  a 
road  it  pays  for  the  hauling  like  anybody  else. 

Senator  MORGAN.  But  you  include  that  in  the  basis  on  which  you 
estimate  12  mills  per  ton  per  mile  for  hauling  freight. 

Mr.  HUNTINGTON.  I  should  think  so;  that  would  be  the  proper  way. 

Senator  MORGAN.  Now,  Mr.  Huntington,  it  is  reasonable  to  suppose 
that  at  least  a  part  of  this  12  mills  per  ton  per  mile  is  based  on  work 
done  for  the  Southern  Pacific,  or  for  companies  related  to  it,  is  it  not? 

Mr.  HUNTINGTON.  It  is  based  on  work  done  for  anybody. 

Senator  MORGAN.  Including  those  companies  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Have  you  any  idea  of  what  would  be  the  estimate 
on  the  income  of  the  road  derived  entirely  from  the  people? 

Mr.  HUNTINGTON.  No;  I  have  not. 


320  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  It  would  be  very  much  larger? 

Mr.  HUNTINGTON.  It  naturally  would  be;  but  when  you  carry 
expensive  goods,  it  is  worth  more  to'carry  them. 

Senator  MORGAN.  So,  when  you  come  to  fix  the  rate  per  ton  per 
mile,  you  would  have  to  take  a  larger  sum  than  12  mills  per  ton  per 
mile,  would  you  not? 

Mr.  HUNTINGTON.  I  should  think  so.  The  stuff  which  the  Southern 
Pacific  or  the  Pacific  Improvement  Company  hauls  is  cheap  tonnage. 
If  the  people  had  the  same  sort  of  stuff  to  carry  they  would  pay  the 
same  rates.  Of  course  we  charge  more  in  proportion  for  a  bale  of  silk 
than  we  do  for  a  ton  of  pig  iron. 

Senator  MORGAN.  What  right  do  you  think  you  have  got  to  charge 
the  patrons  of  your  road  for  keeping  it  up? 

Mr.  HUNTINGTON.  I  really  would  ask  where  the  money  is  corning 
from  to  keep  up  the  road  unless  we  get  it  out  of  those  who  use  the 
road. 

Senator  MORGAN.  1  can  tell  you.  It  would  come  out  of  the  dividends 
which  you  declare  to  yourself. 

Mr.  HUNTINGTON.  The  Southern  Pacific  has  never  declared  a  divi- 
dend. 

Senator  MORGAN.  No;  but  you  have  already  explained  that  by  say- 
ing that  you  have  used  the  money  that  should  go  to  dividends  in  mak- 
ing improvements. 

Mr.  HUNTINGTON.  In  keeping  the  road  up. 

Senator  MORGAN.  And  in  building  extensions. 

Mr.  HUNTINGTON.  That  is  construction,  and  goes  to  another  account 
altogether.  I  say  that  until  the  road  is  up  as  a  first  class  road,  no 
dividends  should  be  declared. 

Senator  MORGAN.  And  until  the  road  is  built  as  far  as  you  want  to 
build  it? 

Mr.  HUNTINGTON.  Yes,  there  is  great  call  for  us  to  build  extensions. 

Senator  MORGAN.  The  same  gentlemen  who  own  the  Southern  Pacific 
are  building  in  Mexico  too,  are  they  not? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  are  they  going  to  wait  for  that  Mexican  road 
to  be  built  before  they  declare  dividends  on  the  Southern  Pacific? 

Mr.  HUNTINGTON.  The  Southern  Pacific  has  nothing  to  do  with  that 
Mexican  road.  That  is  a  separate  corporation. 

Senator  MORGAN.  Do  you  not  carry  the  profits  and  dividends  earned 
by  the  Southern  Pacific  into  that  Mexican  road? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Do  you  build  it  out  of  separate  resources  entirely? 

Mr.  HUNTINGTON.  Yes,  I  think  so. 

Senator  MORGAN.  Is  that  the  fact? 

Mr.  HUNTINGTON.  I  should  think  so. 

Senator  MORGAN.  What  is  the  fact? 

Mr.  HUNTINGTON.  The  Southern  Pacific  has  nothing  to  do  with  that 
Mexican  road. 

Senator  MORGAN.  Are  not  the  profits  made  on  the  Southern  Pacific 
carried  to  this  Mexican  road  to  some  extent? 

Mr.  HUNTINGTON.  Not  a  dollar.  We  have  had  no  dividends  on  the 
Southern  Pacific,  and  therefore  no  money  has  been  carried  over  from  the 
Southern  Pacific  to  this  Mexican  road. 

Senator  MORGAN.  If  you  had  no  dividends  on  the  Southern  Pacific, 
was  it  because  you  were  not  able  to  declare  them,  or  because  you  did 
not  want  to  declare  them? 


GOVERNMENT    DEBT    OF   THE    PACIFIC    EAILROADS.  321 

Mr.  HUNTINGDON.  I  wanted  to  build  the  road  up. 

Senator  MORGAN.  And  to  extend  it? 

Mr.  HUNTINGTON.  We  are  extending  it  somewhat  in  California. 
But  that  is  not  the  Southern  Pacific.  It  is  the  Southern  Pacific  of 
California  that  is  doing  that. 

Senator  MORGAN.  I  think  you  have  got  it  down  pretty  distinctly 
that  the  profits  from  the  Southern  Pacific  are  going  into  these  improve- 
ments instead  of  going  into  your  pockets.  You  mentioned  something 
about  hauling  fruit  with  great  advantage,  and  you  spoke  of  complaints 
being  made  by  Delaware  and  New  Jersey  peach  growers  of  the  low 
rates  of  freight  which  you  charged  to  the  California  fruit  growers. 
You  mentioned  that? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Do  you  recollect  the  rate  of  freight  from  any  point 
on  the  Southern  Pacific,  say  from  Los  Angeles,  to  Chicago  for  fruit? 

Mr.  HUNTINGTON.  I  do  not  know  just  what  it  is. 

Senator  MORGAN.  Is  it  not  $1.20  per  hundred  pounds? 

Mr.  HUNTINGTON.  It  may  be  as  low  as  that  5  perhaps  it  is.  We  carry 
great  weight  besides  the  fruit.  We  take  10  tons  of  freight,  or  there- 
abouts, and  some  34  tons  of  car  and  ice.  In  other  words,  we  haul  more 
than  3  pounds  of  dead  weight  to  1  pound  of  proper  freight. 

Senator  MORGAN.  Take  a  carload  of  fruit  destined  from  Los  Angeles 
to  Chicago,  the  Southern  Pacific  Company  would  haul  it  435  miles, 
would  it  not? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  From  Los  Angeles  to  where  you  strike  the  Central 
Pacific  road  ? 

Mr.  HUNTINGTON.  I  do  not  know  how  far  it  is.  It  is  something  like 
that,  I  should  think. 

Senator  MORGAN.  And  the  Central  Pacific  haul  is  743  miles? 

Mr.  HUNTINGTON.  Something  more.  The  Central  Pacific  would 
haul  it  from  Goshen,  I  suppose,  and  that  would  be  200  miles  added  to 
the  743  miles. 

Senator  MORGAN.  Do  you  not  know  that,  on  that  kind  of  freight, 
under  an  agreement  between  the  Central  Pacific  and  the  Southern 
Pacific,  the  Southern  Pacific  gets  54  per  cent  for  hauling  that  fruit  435 
miles? 

Mr.  HUNTINGTON.  No,  I  do  not  know  that. 

Senator  MORGAN.  If  such  a  thing  as  that  exists,  it  would  be  very 
bad,  would  it  not? 

Mr.  HUNTINGTON.  I  do  not  know.  If  it  does  exist  I  have  no  doubt 
that  it  is  all  right.  I  do  not  know  just  what  they  do. 

Senator  MORGAN.  You  do  not  want  to  correct  that' 

Mr.  HUNTINGTON.  Not  without  inquiry. 

Senator  MORGAN.  Who  would  you  inquire  from! 

Mr.  HUNTINGTON.  From  our  trafiic  people. 

Senator  MORGAN.  Who? 

Mr.  HUNTINGTON.  From  Mr.  Stubbs. 

Senator  MORGAN.  Mr.  Stubbs  always  comes  in  in  these  transac- 
tions. 

Mr.  HUNTINGTON.  Naturally. 

Senator  MORGAN.  Is  Mr.  Stubbs  agent  for  both  companies  f 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  As  vice-president  of  the  Central  Pacific  Company 
do  you  think  you  ought  to  permit  Mr.  Stubbs,  as  traffic  agent,  to  charge 
54  per  cent  in  favor  of  the  Southern  Pacific  for  hauling  fruit  435  miles, 
PR 21 


322  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

and  46  per  cent  in  favor  of  the  Central  Pacific  for  hauling  the  same 
743  miles? 

Mr.  HUNTINGTON.  That  would  depend  upon  what  the  Southern 
Pacific  does  in  gathering  in  the  freight  and  loading  it,  and  perhaps 
supplying  the  ice.  For  instance,  in  hauling  freight  from  San  Francisco 
to  Ogdeu,  we  got  80  cents  on  the  Central  Pacific  (800  miles),  while  the 
Union  Pacific,  in  hauling  the  same  freight  to  Silver  Bow,  gets  $4.25  and 
vice  versa.  That  was  running  along  a  good  while,  and  I  did  not  think 
it  exactly  right,  but  the  traffic  men  said  that  it  was.  We  hauled  it  as 
far  for  80  cents  as  the  Union  Pacific  hauled  it  for  $4.25. 

Senator  MORGAN.  Do  you  not  haul  a  large  amount  of  fruit  from  Los 
Angeles  and  from  places  south  and  east  of  Los  Angeles  in  California 
to  the  interior  States  east  of  the  Rocky  Mountains  on  the  Southern 
Pacific? 

Mr.  HUNTINGTON.  No;  I  do  not  think  we  do. 

Senator  MORGAN.  It  goes  the  other  way? 

Mr.  HUNTINGTON.  Yes.  The  Texas  Pacific  people  have  a  good  road, 
and  why  they  do  not  get  this  trade  I  do  not  know.  I  do  not  think  that 
the  Southern  Pacific  hauls  any  of  it.  Our  people,  for  some  reason,  have 
sent  it  all  the  other  way.  It  may  be  that  that  is  a  part  of  the  consid- 
eration. 

Senator  MORGAN.  It  was  not  because  you  could  not  deliver  the  fruit 
from  the  Southern  Pacific  as  soon  as  over  the  Central  Pacific  on  account 
of  crossing  the  ferry? 

Mr.  HUNTINGTON.  It  would  not  cross  any  ferry. 

Senator  MORGAN.  I  mean  by  going  to  Oakland  and  from  there  to 
Ogden? 

Mr.  HUNTINGTON.  I  think  the  time  would  be  about  the  same  either 
way.  It  might  be  a  little  shorter  time  over  the  Southern  line. 

Senator  MORGAN.  If  the  time  is  about  the  same,  why  would  it  be 
sent  over  the  Central  Pacific  instead  of  over  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  do  not  know  unless  it  was  because  our  people 
wanted  to  do  it.  You  see,  the  Southern  Pacific  got  a  little  extra  for 
it.  That  is  usual,  perhaps.  The  Southern  Pacific  took  the  freight  and 
packed  it  up  and  got  a  little  extra. 

Senator  MORGAN.  It  got  54  per  cent  of  the  freight. 

Mr.  HUNTINGTON.  If  that  was  so,  there  was  good  reason  for  it,  I 
have  no  doubt.  I  do  not  know  the  reason  myself;  but  it  is  a  fact  that 
instead  of  sending  fruit  from  Los  Angeles  by  the  Southern  Pacific,  they 
send  it  by  the  Central  Pacific.  I  think  it  nearly  all  goes  that  way. 

Senator  MORGAN.  That  is  the  choice  of  the  company.  The  company 
wants  to  have  it  all  that  way. 

Mr.  HUNTINGTON.  It  goes  that  way.  The  reason  for  it  I  do  not 
know. 

Senator  MORGAN.  This  435  miles  of  road  between  Los  Angeles  and 
the  connection  of  the  Southern  Pacific  with  the  Central  Pacific  runs 
through  the  San  Joaquin  Valley? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  many  cars  can  you  haul  by  one  locomotive 
on  that  level  piece  of  road  ? 

Mr.  HUNTINGTON.  We  can  haul  probably  five  times  as  many  cars  as 
we  can  haul  from  Los  Angeles  to  Baker sville.  It  is  a  very  ugly  piece 
of  road  from  Los  Angeles  to  Bakersville.  It  has  heavy  grades  up 
the  Santa  Clara  to  the  summit  of  the  mountains,  and  also  down  the 
mountains. 

Senator  MORGAN.  Then  take  Fresno  and  Bakersville,  and  that  vicin- 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  323 

ity  where  these  large  graperies  and  vineries  and  those  immense  orchards 
of  oranges  are,  and  you  would  have  a  level  road  from  there  to  San 
Francisco  ! 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  could  haul  60  cars  to  a  train  on  that  road? 

Mr.  HUNTINGTON.  Yes;  with  the  best  engine,  but  we  do  not  haul  as 
many  cars  as  that. 

Senator  MORGAN.  In  leaving  Bakersville  to  go  to  New  Orleans  with 
a  load  of  fruit,  how  many  cars  can  you  haul  with  one  locomotive! 

Mr.  HUNTINGTON.  The  train  has  to  go  over  the  mountains. 

Senator  MORGAN.  Can  you  haul  13  or  14  or  15  cars  to  a  train? 

Mr.  HUNTINGTON.  Not  over  the  mountains. 

Senator  MORGAN.  The  fruit  trade  from  California  to  the  East  is  a 
very  important  matter,  is  it  not? 

Mr.  HUNTINGTON.  Yes;  it  is  an  important  item  in  the  business. 

Senator  MORGAN.  It  includes  the  shipping  of  wines  and  brandies 
and  all  that,  does  it  not? 

Mr.  HUNTINGTON.  I  suppose  the  wines  and  brandies  are  shipped  at 
very  low  rates.  There  is  competition  by  water  upon  them. 

Senator  MORGAN.  And  they  benefit  in  quality  by  being  shipped  by 
water  ? 

Mr.  HUNTINGTON.  Yes;  some  people  claim  that,  but  I  think  a  ride 
by  rail  would  do  them  good,  too. 

Senator  MORGAN.  The  people  in  the  section  of  California  from  Los 
Angeles  up  to  San  Francisco  make  very  large  annual  shipments  of  fruits 
to  market? 

Mr.  HUNTINGTON.  Yes;  I  think  the  majority  of  the  fruit  comes  from 
south  of  the  Sierra  Madre  Mountains — from  San  Bernardino  and  San 
Diego. 

Senator  MORGAN.  And  all  this  fruit  goes  over  the  Central  Pacific? 

Mr.  HUNTINGTON.  Not  all. 

Senator  MORGAN.  Well,  very  nearly  all. 

Mr.  HUNTINGTON.  I  think  most  of  itdoes.  I  never  have  heard  of  any 
fruit  going,  to  a  considerable  extent,  over  the  Southern  Pacific. 

Senator  MORGAN.  Is  not  the  fruit  interest  the  largest  agricultural 
interest  in  that  section  of  California? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  Very  much  the  largest? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  The  wheat  crop  has  rather  petered  out? 

Mr.  HUNTINGTON.  There  is  very  little  wheat  there. 

Senator  MORGAN.  It  is  the  same  from  the  Napa  Valley  to  San  Fran- 
cisco, is  it  not?  that  is  a  fruit  country? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  So  that  from  Napa  Valley  clear  on  down,  and 
nearly  as  far  as  San  Diego,  the  main  agricultural  crop  of  the  country 
is  fruit? 

Mr.  HUNTINGTON.  They  raise  a  good  deal  of  grain  in  the  San 
Joaquin  Valley  and  in  the  Salinas;  but  I  should  say  that  the  tonnage 
of  fruit  was  greater  than  that  of  grain. 

Senator  MORGAN.  And  if  the  tonnage  is  greater,  the  value  must  be 
immensely  greater  ? 

Mr.  HUNTINGTON.  I  should  think  so. 

Senator  MORGAN.  What  is  the  average  freight  between  Los  Angeles 
and  New  York  City  upon  a  carload  of  grapes? 

Mr.  HUNTINGTON.  I  do  not  think  we  send  grapes  that  way. 


324  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Well,  on  a  carload  of  peaches  ? 

Mr.  HUNTINGDON.  I  do  not  think  we  send  peaches  that  way. 

Senator  MORGAN.  On  a  carload  of  pears  ? 

Mr.  HUNTINGTON.  The  freight  is  local  to  New  Orleans. 

Senator  MORGAN.  What  has  been,  for  the  last  three  or  four  years, 
the  average  cost  a  of  carload  of  fruit  of  any  description,  sent  from  Los 
Angeles,  either  by  the  Southern  Pacific  to  New  Orleans,  or  by  the 
Central  Pacific  to  New  York. 

Mr.  HUNTINGTON.  I  do  not  know,  but  I  should  think  about  1  cent 
a  pound. 

Senator  MORGAN.  How  much  a  car? 

Mr.  HUNTINGTON.  It  depends  upon  the  amount  in  the  car..  That 
varies.  The  rate  is  so  much  per  hundred  pounds. 

The  CHAIRMAN.  What  is  the  average  number  of  pounds  required  to 
be  shipped  for  a  carload  ? 

Mr.  HUNTINGTON.  It  depends  on  what  the  freight  is. 

The  CHAIRMAN.  On  fruits. 

Mr.  HUNTINGTON.  I  do  not  know  what  it  is.  My  impression  would 
be  10  tons,  because  they  take  a  good  deal  of  ice,  as  fruit  has  to  be  sent 
in  a  refrigerator  car. 

The  CHAIRMAN.  You  can  not  take  as  many  pounds  of  fruit  in  a  car 
as  you  could  of  wheat? 

Mr.  HUNTINGTON.  Oh,  no. 

The  CHAIRMAN.  Why  not? 

Mr.  HUNTINGTON.  Because  the  wheat  goes  in  bulk.  Of  some  goods 
you  can  send  20,000  or  30,000  pounds  in  a  car  and  of  others  40,000. 

The  CHAIRMAN.  Within  what  classification  does  fruit  come? 

Mr.  HUNTINGTON.  My  impression  is  that  they  do  not  put  more  than 
10  tons  of  fresh  fruit  into  a  car. 

The  CHAIRMAN.  They  carry  more  canned  fruit  than  that? 

Mr.  HUNTINGTON.  Oh,  yes. 

Senator  MORGAN.  What  would  be  the  whole  weight,  including  ice,  of 
a  car  which  carries  10  tons  of  fruit? 

Mr.  HUNTINGTON.  I  do  not  know.  I  think  that  for  10  tons  of  fruit 
there  would  be  30  tons  of  car  and  ice. 

Senator  MORGAN.  I  do  not  understand  you. 

Mr.  HUNTINGTON.  I  think  that  a  refrigerator  car,  properly  iced  for 
handling  fresh  fruit,  would  weigh  over  30  tons  and  would  carry  10  tons 
of  fruit,  which  would  make  the  whole  weight  40  tons. 

The  CHAIRMAN.  With  ice? 

Mr.  HUNTINGTON.  I  have  got  the  ice  in  with  the  car.  A  refriger- 
.  lor  car,  iced,  would  weigh  some  30  tons.  At  least,  I  have  got  that 
impression. 

Senator  MORGAN.  And  you  can  put  10  tons  of  fruit  into  a  refriger- 
ator car? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  that  is  the  limit? 

Mr.  HUNTINGTON.  I  have  got  the  impression  that  that  is  about  the 
way  we  carry  fruit. 

Senator  MORGAN.  With  this  10  tons  of  fruit  in  an  iced  refrigerator 
car  what  is  the  freight  on  a  carload  from  Los  Angeles  to  New  York? 

Mr.  HUNTINGTON.  You  may  say  \\  cents  a  pound. 

Senator  MORGAN.  A  cent  and  a  half  a  pound  on  the  fruit? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Or  on  the  ice? 

Mr.  HUNTINGTON.  No;  we  do  not  charge  freight  on  the  ice.  We 
transport  the  fruit  in  a  certain  way. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  325 

Senator  MORGAN.  That  would  make  the  cost  of  transporting  the 
fruit  $300. 

Mr.  HUNTINGTON.  Yes ;  and  sometimes  it  goes  to  $500.  It  has  been 
more  than  that. 

The  CHAIRMAN.  You  do  not  carry  your  canned  fruit  in  refrigerator 
cars? 

Mr.  HUNTINGTON.  No;  and  it  is  packed  very  much  closer.  The  fresh 
fruit  is  packed  loosely. 

Senator  MORGAN.  In  sending  your  refrigerator  cars  loaded  with  ice 
from  Los  Angeles,  do  you  make  rates  clear  through  to  New  York? 

Mr.  HUNTINGTON.  I  think  so.  That  is  by  agreement  with  all  the 
other  lines. 

Senator  MORGAN.  And  the  fruit  is  put  in  New  York  at  a  price  stipu- 
lated at  Los  Angeles? 

Mr.  HUNTINGTON.  I  understand  the  price  has  to  be  fixed  before  the 
start. 

Senator  MORGAN.  In  making  that  haul,  if  it  is  to  be  $400  a  car,  the 
Southern  Pacific  Company  would  get  54  per  cent  of  that  $400? 

Mr.  HUNTINGTON.  I  do  not  know  how  it  would  be  made  up. 

Senator  MORGAN.  Or  it  would  get  54  per  cent  of  whatever  was 
allowed  to  the  Southern  Pacific  and  the  Central  Pacific  for  carrying 
the  fruit? 

Mr.  HUNTINGTON.  Yes.  I  am  not  familiar  with  the  operations.  If 
I  had  known  that  Senator  Morgan  wanted  to  know  about  them  I  could 
have  had  somebody  here  to  inform  him  more  accurately. 

Senator  MORGAN.  Then,  for  all  shipments  between  Napa  and  Bakers- 
field  for  freights  passing  over  the  Central  Pacific,  the  Southern  Pacific 
has  the  advantage  of  a  level  country  over  which  you  can  haul  60  cars 
to  a  train? 

Mr.  HUNTINGTON.  Napa  is  different.  Napa  is  not  in  the  San  Joaquin 
Valley.  There  is  considerable  grade  there  until  we  get  down  to  Fair- 
field  or  Suisin.  My  impression  is  that  we  can  not  haul  25  cars  on  a 
train  from  Napa  to  Bridgeport,  at  the  foot  of  the  grade. 

Senator  MORGAN.  Are  not  the  rates  for  hauling  this  crop  of  fruit 
prescribed  by  the  Southern  Pacific  Company  ? 

Mr.  HUNTINGTON.  Oh,  no;  we  can  not  fix  the  rates. 

Senator  MORGAN.  Who  can  fix  them  ? 

Mr.  HUNTINGTON.  It  has  got  to  be  a  joint  arrangement. 

Senator  MORGAN.  A  joint  arrangement  with  whom? 

Mr.  HUNTINGTON.  With  whatever  roads  the  fruit  goes  over.  It  will 
be  with  one  set  of  people  if  the  fruit  goes  to  Minneapolis ;  with  another 
set  of  people  if  it  goes  to  Chicago,  and  with  other  sets  if  it  goes  to  St. 
Louis. 

Senator  MORGAN.  Confine  yourself  to  the  Central  Pacific  and  South- 
ern Pacific  roads.  By  whom  are  the  prices  for  fruit  made? 

Mr.  HUNTINGTON.  There  is  an  agreement  and  division. 

Senator  MORGAN.  Between  the  Central  Pacific  and  the  Southern 
Pacific? 

Mr.  HUNTINGTON.  Between  all  the  roads  interested  in  the  transpor- 
tation. 

Senator  MORGAN.  I  am  talking  about  the  Central  Pacific  and  the 
Southern  Pacific.  I  want  to  know  who  prescribes  the  agreement  for 
carrying  fruit  as  between  the  Southern  and  the  Central  Pacific. 

Mr.  HUNTINGTON.  I  suppose  Mr.  Stubbs  or  Mr.  Smurr. 

Senator  MORGAN.  So  Mr.  Stubbs  would  have  the  right  to  say,  and 
does  say,  what  the  rates  and  division  are  to  be;  and  you  think  it  is  all 
right  if  he  does  so  ? 


326  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGDON.  Yes. 

Senator  MORGAN.  You  think  it  is  all  right  that  the  people  of  Cali- 
fornia should  be  compelled  to  take  their  great  crop  of  fruit  over  the 
Central  Pacific  instead  of  by  competing  lines'? 

Mr.  HUNTINGTON.  No.  The  Atchison  and  Topeka  is  in  there — a 
competing  road,  with  a  most  active  set  of  men. 

Senator  MORGAN.  In  where? 

Mr.  HUNTINGTON.  In  California — in  San  Francisco  and  Los  Angeles. 

Senator  MORGAN.  Buc,  so  far  as  the  Central  Pacific  and  the  South- 
ern Pacific  are  concerned,  and  so  far  as  they  can  control  the  freights,  the 
matter  would  be  left  entirely  to  Mr.  Stubbs  to  say  what  the  rates  ought 
to  be? 

Mr.  HUNTINGTON.  I  should  think  so.  If  I  were  to  have  to  decide  it, 
I  should  leave  it  to  Mr.  Stubbs. 

Senator  MORGAN.  The  matter  is  to  be  decided  by  Mr.  Stubbs  both 
as  to  the  rate  of  freight  and  then  as  to  the  rate  for  which  it  shall  be 
carried  by  the  Southern  Pacific  to  the  Central  Pacific  and  over  the 
Central  Pacific  to  the  point  of  distribution? 

Mr.  HUNTINGTON.  I  should  think  that  would  be  the  result.  But  the 
freights  would  have  to  be  reasonable.  They  are  probably  agreed  rates. 
If  we  wanted  unreasonable  rates,  the  Atchison  people  would  come  in 
and  take  the  business. 

Senator  MORGAN.  Can  you  state  any  reason  why  those  two  railroad 
companies  have  not  got  the  monopoly  of  the  transportation  of  fruit 
from  California  under  this  arrangement? 

Mr.  HUNTINGTON.  There  are  six  or  seven  or  eight  railroad  companies 
that  compete  for  that  business  in  San  Francisco — not  so  much,  perhaps, 
for  the  green  fruit. 

Senator  MORGAN.  Do  they  get  it? 

Mr.  HUNTINGTON.  They  probably  get  some. 

Senator  MORGAN.  How  much  do  they  get? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Are  they  getting  any? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  Is  it  not  the  policy  of  the  Southern  Pacific  and 
the  Central  Pacific  to  keep  them  out? 

Mr.  HUNTINGTON.  We  can  not  keep  them  out. 

Senator  MORGAN.  Is  is  not  your  policy  to  keep  them  out,  if  you  can 
get  the  business  ? 

Mr.  HUNTINGTON.  No;  we  do  not  want  to  keep  them  out.  There 
must  be  competition;  we  must  do  business  on  business  lines,  and  we 
make  our  rates  as  low  as  we  can  do  the  business  for. 

Senator  MORGAN.  Is  it  not  your  interest  to  keep  these  other  roads 
out? 

Mr.  HUNTINGTON.  I  do  not  know  that  it  would  be.  I  do  not  know 
that  we  could  keep  them  out  if  we  wished.  There  is  no  use  in  our 
wasting  an  effort  on  it,  for  we  know  that  we  can  not  keep  them  out  it 
we  should  try. 

Senator  MORGAN.  Does  this  general  deal  that  you  spoke  about,  in 
regard  to  the  business  to  be  divided  between  all  the  companies,  apply 
to  fruit? 

Mr.  HUNTINGTON.  Yes ;  I  think  it  applies  to  all  matters. 

Senator  MORGAN.  Is  not  that  the  reason  why  54  per  cent  of  the 
general  income  of  all  of  these  rates  is  given  to  the  Central  Pacific 
under  that  general  agreement? 

Mr.  HUNTINGTON.  I  do  not  know  that  it  is.  I  do  not  think  it  is 
mentioned. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  327 

Senator  MORGAN.  But  is  not  that  the  reason? 

Mr.  HUNTINGDON.  If  it  is,  I  never  thought  of  it. 

Senator  MORGAN.  The  fruit  business  being  the  principal  business  in 
California,  you  never  thought  that  a  monopoly  of  it  would  be  of  an 
advantage  to  you? 

Mr.  HUNTINGTON.  I  do  not  think  that  the  green-fruit  is  anything  like 
a  majority  of  the  tonnage. 

Senator  MORGAN.  How  do  you  distinguish  between  the  green  fruit 
and  the  other  fruit? 

Mr.  HUNTINGTON.  The  preserved  fruit  can  go  anywhere  and  upon 
any  line. 

Senator  MORGAN.  You  mean  the  canned  fruit? 

Mr.  HUNTINGTON.  The  canned  fruit  and  the  dried  fruit.  That  has 
the  world's  market  and  can  go  over  any  line.  The  green  fruit  only 
goes  but  a  short  time,  while  the  other  goes  all  the  year. 

The  CHAIRMAN.  The  green  fruit  consists  of  grapes  and  citrous  fruits. 

Mr.  HUNTINGTON.  Yes;  but  there  is  dried  fruit  and  preserved  fruit, 
and  they  can  go  anywhere.  Grapes,  oranges,  pears,  and  peaches  are 
about  the  only  fruit  that  can  not  be  transported  by  water.  Fruit  is 
not  the  great  tonnage  of  the  State.  The  great  tonnage  is  wines,  and 
that  is  now  sent  over  any  lines.  The  green  fruit  does  not  cut  any  great 
figure  in  the  trade. 

Senator  MORGAN.  About  how  many  car  loads  of  green  fruit  are  sent 
over  the  Central  Pacific  road? 

Mr.  HUNTINGTON.  I  do  not  know  how  many. 

Senator  MORGAN.  You  say  that  the  green  fruit  does  not  cut  any  great 
figure  in  the  business.  How  do  you  know,  if  you  can  not  tell  the  number 
of  carloads  ? 

Mr.  HUNTINGTON.  I  know  it  in  a  general  way. 

Senator  MORGAN.  I  want  it  in  a  particular  way,  if  I  can  get  it. 

Mr.  HUNTINGTON.  There  are  a  great  many  prunes  raised  in  Cali- 
fornia, and  the  whole  prune  crop  is  put  up  in  a  way  that  it  can  be  sent 
by  any  line  of  transportation. 

Senator  MORGAN.  Do  your  railroad  books  show  the  number  of  cars 
of  green  fruit  that  have  gone  over  the  Central  Pacific  for  the  last  five 
years? 

Mr.  HUNTINGTON.  I  should  think  so. 

Senator  MORGAN.  Will  you  give  that  information  to  the  committee? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  I  want  to  know  the  number  of  cars  of  green  fruit 
that  have  passed  over  the  Central  Pacific  annually  for  the  last  five 
years  ? 

The  CHAIRMAN.  And  also  the  number  of  cars  with  canned  goods. 

Mr.  HUNTINGTON.  Shall  I  give  the  weight  by  pounds? 

Senator  MORGAN.  You  may  give  it  by  pounds  and  by  the  number  of 
carloads.  Is  not  one  of  the  matters  which  the  State  railroad  commis- 
sioners have  to  regulate  this  very  important  matter  which  we  have 
been  discussing  about  the  transportation  of  fruits  from  California  to 
the  East? 

Mr.  HUNTINGTON.  It  comes  under  general  traffic.  It  is  a  part  of 
the  traffic  of  the  company.  The  commission  is  a  blind  strike  at  every- 
thing. 

The  CHAIRMAN.  Has  the  board  of  railroad  commissioners  of  Califor- 
nia the  power  to  fix  railroad  rates? 

Mr.  HUNTINGTON.  That  is  a  question  which  the  United  States  court 
is  now  trying.  The  court  has  the  whole  matter  before  it  now. 


328  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

The  CHAIRMAN.  Does  the  law  of  California  give  the  railroad  commis- 
sioners the  power  to  fix  rates? 

Mr.  HUNTINGTON.  The  law  of  California  says  that  the  commission- 
ers can  fix  rates;  and  the  question  before  the  courts  is  whether  they 
can  confiscate  our  property. 

The  CHAIRMAN.  The  question  before  the  courts  is  whether  the  rates 
are  reasonable, 

Mr.  HUNTINGTON.  Yes;  whether  or  not  they  can  confiscate  our  prop- 
erty; for  there  is  a  lively  little  set  over  there  which  would  do  so  if  it 
could. 

The  CHAIRMAN.  That  is  the  same  question  that  is  now  before  the 
courts  of  Nebraska. 

Mr.  PAYSON  (of  counsel  for  Central  Pacific).  There  the  question  is 
whether  there  can  be  a  horizontal  reduction  of  rates  by  25  per  cent 
made  without  hearing  the  railroad  company. 

Senator  MORGAN.  Does  the  California  Pacific  Eailroad  charge  track 
rent  to  the  Southern  Pacific  Company? 

Mr.  HUNTINGTON.  I  do  not  know  how  that  is  done.  I  think  the 
Southern  Pacific  Company  leases  the  California  Pacific. 

Senator  MORGAN.  Do  any  of  these  roads  which  you  or  your  friends 
control,  or  have  controlled,  make  any  charge  for  track  rent  to  the  Ken- 
tucky company — the  Southern  Pacific? 

Mr.  HUNTINGTON.  If  they  lease  the  road,  I  suppose  they  come  in 
under  a  general  lease.  I  do  not  know  how  it  is. 

Senator  MORGAN.  Whether  it  is  track  rent  or  a  general  lease,  how 
much  do  you  realize  for  the  use  of  those  roads  out  of  the  Southern 
Pacific  Company  annually? 

Mr.  HUNTINGTON.  We  never  have  received  any  dividends  on  the 
shares  of  the  Southern  Pacific  Company  at  all. 

Senator  MORGAN.  How  much  do  you  realize  in  favor  of  each  of  these 
companies — how  much  is  paid  to  them  annually? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  About  how  much? 

Mr.  HUNTINGTON.  I  do  not  know.  We  never  have  declared  any 
dividends  on  the  shares. 

Senator  MORGAN.  You  did  not  just  give  those  roads  to  the  Southern 
Pacific  company,  did  you? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  You  hire,  then,  to  the  Southern  Pacific  either  by 
lease  or  track  rent? 

Mr.  HUNTINGTON.  By  lease,  I  think. 

Senator  MORGAN.  How  much  do  you  get  out  of  it? 

Mr.  HUNTINGTON.  We  never  have  received  any  dividends  on  the 
shares. 

Senator  MORGAN.  I  know  perfectly  well  that  you  do  not  intend  to 
declare  any  dividends  on  the  shares.  That  is  not  your  plan.  To  bring 
the  question  down  to  your  comprehension,  you  did  give,  up  to  a  recent 
period,  $1,300,000  a  year  for  the  lease  of  the  Central  Pacific? 

Mr.  HUNTINGTON.  The  Southern  Pacific  paid  $1,200,000  a  year  to 
the  Central  Pacific  and  then  increased  it  to  $1,360,000. 

Senator  MORGAN.  Up  to  within  a  recent  period,  and  up  to  the  end 
of  the  first  ten  years  of  the  lease,  this  Kentucky  company  paid  to  the 
Central  Pacific  Company  twelve  or  thirteen  hundred  thousand  dollars 
a  year  for  the  lease  of  that  road? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  much  did  the  Southern  Pacific  Company  pay 
for  the  leases  for  the  other  roads  which  it  operated  ? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  329 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  About  how  much? 

Mr.  HUNTING-TON.  I  do  not  know  what  was  paid. 

Senator  MORGAN.  What  was  the  aggregate  sum? 

Mr.  HUNTINGTON.  I  can  not  give  you  that  information. 

Senator  MORGAN.  Does  it  not  amount  to  as  much  as  $9,000,000  a 
year,  which  the  Southern  Pacific  pays  for  the  leases  of  all  these  differ- 
ent roads  ? 

Mr.  HUNTINGTON.  I  do  not  know.  The  Southern  Pacific  controls, 
by  ownership  of  shares,  all  the  lines,  I  think,  between  Portland  and 
New  Orleans,  except  the  California  Pacific  and  possibly  the  Northern. 

Senator  MORGAN.  Take  last  year  and  the  year  before  last.  Do  not 
the  books  of  the  Southern  Pacific — this  Kentucky  company — show  that, 
during  these  two  years,  it  has  paid,  by  way  of  leases  for  those  roads 
which  it  controls  and  which  belong  to  you  and  your  associates,  as  much 
as  $9,000,000  a  year? 

Mr.  HUNTINGTON.  I  should  think  that  very  likely  it  ran  along  there. 

Senator  MORGAN.  Is  it  not  even  more  than  that? 

Mr.  HUNTINGTON.  Well,  I  should  think  it  would  be  more. 

Senator  MORGAN.  How  much  more? 

Mr.  HUNTINGTON.  I  do  not  know.  The  Southern  Pacific  paid  enough 
to  these  companies  to  pay  interest  on  their  bonds  and  their  current 
expenses  and  their  taxes.  I  should  think  it  amounted  to  more  than 
that. 

Senator  MORGAN.  About  how  much? 

Mr.  HUNTINGTON.  I  do  not  know;  but  it  seems  to  me  that  it  would 
run  over  that. 

Senator  MORGAN.  That  has  become  a  fixed  charge  on  the  whole 
length  of  the  line? 

Mr.  HUNTINGTON.  Interest  and  taxes,  of  course,  have  to  be  paid. 
These  are  part  of  the  fixed  charges. 

Senator  MORGAN.  Do  these  different  companies  that  are  under  your 
control  make  enough  to  pay  their  way  under  this  arrangement  with  the 
Kentucky  company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  much  more  do  they  make? 

Mr.  HUNTINGTON.  I  would  like  to  send  you  all  our  annual  reports. 
They  give  the  amounts  exactly.  There  is  always  a  little  surplus. 

Senator  MORGAN.  I  do  not  care  about  exact  figures.  I  will  take 
round  figures. 

Mr.  HUNTINGTON.  My  impression  is  that  they  make,  as  an  average, 
a  little  over  a  million  dollars  a  year — sometimes  more,  sometimes  less. 

Senator  MORGAN.  For  each  road? 

Mr.  HUNTINGTON.  No;  for  the  whole  of  them. 

Senator  MORGAN.  So  that  the  Southern  Pacific  makes  a  net  profit  of 
$1,000,000  a  year  out  of  these  roads? 

Mr.  HUNTINGTON.  Not  exactly;  there  are  always  improvements  to  be 
made.  The  bookkeeping  will  show  that,  but  the  money  is  hardly  ever 
in  the  till. 

Senator  MORGAN.  Because  you  are  all  the  time  improving  and 
increasing  the  value  of  the  property? 

Mr.  HUNTINGTON.  Keeping  it  up. 

Senator  MORGAN.  And  extending  it? 

Mr.  HUNTINGTON.  Yes;  people  in  the  different  neighborhoods  come 
to  us  and  ask  us  to  build  roads  here  and  there,  and  we  are  desirous  to 
accommodate  them  and  have  done  so. 


330  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  The  Southern  Pacific  Bail  road  is  a  very  good 
property,  is  it  not? 

Mr.  HUNTINGTON.  I  think  very  well  of  it.  It  will  take  time  to  work 
it  out. 

Senator  MORGAN.  But  this  California  Pacific.  That  seems  to  be  in 
a  sort  of  gang  by  itself. 

Mr.  HUNTINGTON.    I  do  not  understand  you. 

Senator  MORGAN.  "Gang  by  itself"  is  a  Southern  expression.  I 
mean  that  it  seems  to  be  under  a  different  management  from  the  others. 

Mr.  HUNTINGTON.  Yes;  it  was  built  up  by  other  parties,  and  we 
finally  bought  it. 

Senator  MORGAN.  Who  bought  it? 

Mr.  HUNTINGTON.  Stanford  and  Crocker  and  Hopkins  and  myself, 
and  Col  ton,  I  guess;  and  maybe  Hammond  had  a  little  interest  in 
it.  There  were  some  lesser  interests.  I  think  there  were  four  large 
interests. 

Senator  MORGAN.  With  your  guesses  and  your  maybes  arid  your 
thinkings,  I  would  like  to  know  how  much  of  your  statement  is  mere 
guess  and  conjecture. 

Mr.  HUNTINGTON.  I  am  quite  sure  we  had  a  majority,  a  considerable 
majority  of  that  company;  I  can  not  say  exactly  how  much. 

Senator  MORGAN,  i'oufour  being  the  majority  owners  of  the  Califor- 
nia Pacific  and  having  power  of  control  over  it,  why  did  you  not  put  it 
into  the  Southern  Pacific  to  keep  it  in  a  "gang  by  itself?" 

Mr.  HUNTINGTON.  I  do  not  know  that  I  can  tell  you  the  reason  why. 
We  bought  a  majority  of  the  shares,  and  we  did  not  buy  all  the  shares. 
We  have  not  got  them  now,  by  a  long  way. 

Senator  MORGAN.     But  you  have  the  controlling  power? 

Mr.  HUNTINGTON.  We  have  the  majority. 

Senator  MORGAN.  The  majority  could  carry  the  California  Pacific 
into  the  Southern  Pacific.  Why  did  it  not  do  so? 

Mr.  HUNTINGTON.  We  made  up  our  minds  not  to  do  it,  I  suppose, 
and  did  not  do  it. 

Senator  MORGAN.  You  had  some  reason  for  that,  had  you  not? 

Mr.  HUNTINGTON.  I  forget  the  reason;  no  doubt  we  had  some  good 
reason  for  it. 

Senator  MORGAN.  Was  it  not  that  the  possession  of  the  California 
Pacific  gave  you  the  leverage  by  which  you  could  control  both  the 
Southern  Pacific  and  the  Central  Pacific  lines? 

Mr.  HUNTINGTON.  The  Sacramento  River  is  always  open  and  is  as 
free  and  cheap  a  means  of  communication  as  any  in  the  world. 

Senator  MORGAN.  The  Sacramento  Eiver  is  pretty  well  filled  up,  is 
it  not? 

Mr.  HUNTINGTON.  No;  there  are  4  feet  of  water  in  the  Sacramento, 
and  an  immense  commerce  can  be  done  over  4  feet  of  water.  They  are 
doing  an  immense  business  now,  above  Sacramento,  over  20  inches  of 
water.  I  think  there  was  a  lawsuit  with  some  parties  in  San  Francisco 
who  held  a  lot  of  those  shares  of  the  California  Pacific,  and  our  people 
wanted  to  compromise  with  them;  but  I  did  not.  The  suit  ran  along 
for  a  good  many  years,  and  I  think  that  is  the  reason  why  we  did  not 
put  in  the  California  Pacific. 

Senator  MORGAN.  What  lawsuit  was  that? 

Mr.  HUNTINGTON.  It  was  what  was  known  as  the  Haskius  and  Mayne 
suit. 

Senator  MORGAN.  It  was  not  the  Brannan  lawsuit? 

Mr.  HUNTINGTON.  No;  that  was  in  the  air. 


GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  331 

Senator  MORGAN.  When  was  tbat  lawsuit  ended? 

Mr.  HUNTING  TON.  Three  or  four  years  ago. 

Senator  MORGAN.  Then  you  have  had  plenty  of  time  since  then  to 
put  the  California  Pacific  in  with  the  Southern  Pacific? 

Mr.  HUNTINGTON.  I  do  not  think  that  the  question  has  been  discussed 
since  then. 

Senator  MORGAN.  How  much  do  you  get  a  year  for  the  California 
Pacific  under  lease? 

Mr.  HUNTINGTON.  I  do  not  know. 

Senator  MORGAN.  As  nearly  as  you  can  think,  how  much  do  you  get 
per  year? 

Mr.  HUNTINGTON.  I  would  not  say.    It  is  less  than  a  million  a  year. 

Senator  MORGAN.  How  much  less? 

Mr.  HUNTINGTON.  I  do  not  know.  I  will  get  the  exact  figures  for 
you  in  a  day  or  two. 

Senator  MORGAN.  I  can  not  examine  you  on  oath  if  I  have  got  to 
wait  for  those  figures.  I  would  like  to  know  now. 

Mr.  HUNTINGTON.  I  can  not  say  what  it  is.  I  have  not  seen  the  lease. 
It  is  a  matter  which  our  people  have  dealt  with. 

Senator  MORGAN.  Are  you  a  member  of  the  board  of  directors  of  the 
California  Pacific? 

Mr.  HUNTINGTON.  I  do  not  believe  I  am.  I  may  be,  but  I  believe  I 
am  not. 

Senator  MORGAN.  Who  controls  that — Mr.  Stubbs? 

Mr.  HUNTINGTON.  He  controls  the  traffic ;  he  is  the  head  of  the 
traffic  department. 

Senator  MORGAN.  Who  made  this  contract  or  lease  between  the 
California  Pacific  and  the  Kentucky  company  ? 

Mr.  HUNTINGTON.  I"  have  no  doubt  that  it  was  made  between  the 
boards  of  directors  of  the  two  companies. 

Senator  MORGAN.  You  do  not  know  anything  about  it? 

Mr.  HUNTINGTON.  That  would  be  the  practice. 

Senator  MORGAN.  It  must  have  been  made  with  your  approval  as 
president  of  the  Kentucky  company? 

Mr.  HUNTINGTON.  No  doubt. 

Senator  MORGAN.  And  you  approved  it? 

Mr.  HUNTINGTON.  Not  necessarily;  but  I  have  no  doubt  it  was 
satisfactory. 

Senator  MORGAN.  If  you  were  not  under  the  necessity  of  approving 
it,  who  was? 

Mr.  HUNTINGTON.  Charles  F.  Crocker.  He  is  the  first  vice-president. 
He  is  at  San  Francisco  and  can  do  whatever  the  president  can  do. 

Senator  MORGAN.  And  the  lease  was  made  with  the  Southern  Pacific 
and  you  do  not  know  what  it  was? 

Mr.  HUNTINGTON.  I  do  not  know  the  exact  figures. 

Senator  MORGAN.  I  am  not  calling  for  exact  figures,  but  for  your 
best  recollection. 

Mr.  HUNTINGTON.  As  I  have  not  the  exact  figure  I  do  not  know 
how  to  state  it. 

Senator  MORGAN.  You  have  been  four  or  five  days  doing  that  very 
same  thing.  You  can  state  it  from  your  best  knowledge  and  recollec- 
tion. 

Mr.  HUNTINGTON.  I  do  not  believe  I  have  it  clear  as  to  what  the 
figure  is.  It  seems  that  I  ought  to  know  it. 

Senator  MORGAN.  It  seems  so  to  me. 

Mr.  HUNTINGTON.  Yesj  it  strikes  me  so. 


332  GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS. 

Senator  MORGAN.  Do  any  of  those  companies  that  are  controlled 
by  your  Kentucky  company  owe  more  debts  than  they  can  pay? 

Mr.  HUNTINGTON.  I  should  say  not;  in  fact,  I  am  very  sure  that 
they  can  all  pay  their  debts. 

Senator  MORGAN.  Are  any  of  those  companies  which  you  and  Stan- 
ford and  Crocker  and  Hopkins  controlled  when  you  were  building  the 
Central  Pacific,  and  when  you  were  building  the  Southern  Pacific, 
able  to  pay  all  their  debts? 

Mr.  HUNTINGTON.  I  think  so.  I  do  not  think  of  any  of  those  com- 
panies at  this  time  that  is  not  abundantly  able  to  pay  its  debts.  They 
are  growing  properties.  They  were  built  through  a  country  where  there 
were  then  very  few  people,  and  now  they  are  growing. 

Senator  MORGAN.  Then  all  these  different  companies  are  solvent? 

Mr.  HUNTINGTON.  Very  decidedly  so. 

Senator  MORGAN.  Every  one  of  them  ? 

Mr.  HUNTINGTON.  I  think  so;  they  are  all  growing  properties  and 
going  properties. 

Senator  MORGAN.  If  that  were  the  case,  what  was  the  necessity  to 
wind  up  and  disincorporate  this  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  We  got  through  with  that.  That  was  a  company 
organized  for  a  certain  purpose.  Mr.  E.  B.  Crocker  went  out  of  it,  and 
that  I  think  was  one  reason  for  disincorporating  it.  We  got  through 
with  everything  and  we  organized  the  Western  Development  Company 
and  undertook  the  business.  I  think  there  was  some  interest  in  that 
company  (I  do  not  recollect  what)  which  went  out,  and  we  thought  we 
would  close  up  the  concern. 

Senator  MORGAN.  Did  you  disincorporate  the  Western  Development 
Company  too? 

Mr.  HUNTINGTON.  I  think  not. 

Senator  MORGAN.  That  still  lives? 

Mr.  HUNTINGTON.  Yes,  sir. 

Senator  MORGAN.  Is  that  company  at  work  now! 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Then  you  came  to  the  Pacific  Improvement  Com- 
pany? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  That  is  at  work  now? 

Mr.  HUNTINGTON.  I  think  they  are  doing  some  work  on  the  coast  line. 

Senator  MORGAN.  Neither  of  those  companies  owns  any  railroads? 

Mr.  HUNTINGTON.  No;  they  are  not  railroad  companies;  they  were 
contract  and  operating  companies. 

Senator  MORGAN.  To  build  railroads  ? 

Mr.  HUNTINGTON.  To  build  anything — ships,  railroads,  and  canals. 

Senator  MORGAN.  And  they  built  all  of  those  railroads  which  were 
put  into  the  Southern  Pacific  ? 

Mr.  HUNTINGTON.  No;  there  were  a  good  many  of  them  that  failed, 
and  that  we  bought. 

Senator  MORGAN.  The  Pacific  Improvement  Company  either  built 
them  or  bought  them  f 

Mr.  HUNTINGTON.  Yes;  I  think  so. 

Senator  MORGAN.  These  roads  which  the  Pacific  Improvement  Com- 
pany either  built  or  bought  were  organized  under  and  became  the 
property  of  a  separate  organization  ? 

Mr.  HUNTINGTON.  Yes ;  they  have  been  incorporated  with  the  South- 
ern Pacific  of  California. 

Senator  MORGAN.  You  paid  the  debts  upon  them! 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  333 

Mr.  HUNTINGDON.  There  were  debts  upon  them  when  we  bought 
them.  There  was  a  mortgage  on  the  road  from  Salinas  to  Monterey 
when  we  bought  it. 

Senator  MORGAN.  Has  that  mortgage  been  paid  ? 

Mr.  HUNTINGDON.  No;  it  is  not  due  yet.  The  interest  on  it  has  been 
paid. 

Senator  MORGAN.  What  was  the  next  road  that  you  bought? 

Mr.  HUNTINGTON.  The  Stockton  and  Copperopolis. 

Senator  MORGAN.  Did  that  have  any  debt  upon  it? 

Mr.  HUNTINGTON.  It  had  a  million  dollars  of  8  per  cent  bonds  out, 
and  we  issued  for  that  half  a  million  of  5  per  cent  bonds. 

Senator  MORGAN.  Is  that  mortgage  outstanding? 

Mr.  HUNTINGTON.  It  is  not  due  yet. 

Senator  MORGAN.  It  is  outstanding? 

Mr.  HUNTINGTON.  The  bonds  are  out. 

Senator  MORGAN.  That  road  was  bought  by  one  of  these  companies? 

Mr.  HUNTINGTON.  I  think  it  was  bought  by  the  Western  Develop- 
ment Company. 

Senator  MORGAN.  Go  ahead  now. 

Mr.  HUNTINGTON.  There  is  another  little  road  running  out  from  Gait, 
and  another  near  there. 

Senator  MORGAN.  Did  you  buy  these  two  roads  or  did  you  build 
them  ? 

Mr.  HUNTINGTON.  We  bought  them. 

Senator  MORGAN.  Is  there  any  mortgage  on  these  two  roads? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  other  roads  did  you  build  or  buy? 

Mr.  HUNTINGTON.  The  Placerville  road  from  Sacramento  to  Placer  - 
ville.  That  we  bought.  We  built  9  miles  at  the  end  of  it.  We  com- 
pleted it. 

Senator  MORGAN.  Any  more? 

Mr.  HUNTINGTON.  We  bought  a  road  from  Maysville  down  to  Macks 
Landing.  There  is  a  mortgage  on  it  now.  Then  we  bought  a  little 
road  running  over  to  Ion  a  Valley. 

Senator  MORGAN.  Is  there  any  mortgage  on  that?  , 

Mr.  HUNTINGTON.  There  is  a  mortgage  on  that. 

Senator  MORGAN.  Did  you  buy  any  other  roads? 

Mr.  HUNTINGTON.  I  think  there  are  some  others.  I  do  not  know.  I 
think  that  we  bought  a  road  from  lona  to  Los  Angeles,  and  we  bought 
a  road  from  Los  Angeles  to  Santa  Monica  Bay. 

Senator  MORGAN.  Is  there  any  mortgage  on  that? 

Mr.  HUNTINGTON.  Yes ;  there  is  a  mortgage  on  that.  Then  I  believe 
we  bought  the  road  from  San  Bernardino  to  Biverside,  and  I  think  a 
road  from  San  Bernardino  up  to  Bed  Lines. 

Senator  MORGAN.  Are  there  mortgages  on  both  these  roads? 

Mr.  HUNTINGTON.  I  think  so;  and  I  think  there  are  some  others. 
The  roads  were  generally  in  bankruptcy  when  we  took  then.  We  put 
the  prices  down  in  every  case  from  the  rates  which  they  had  been 
charging  and  we  made  money,  but  that  was  owing  to  our  superior  way 
of  operating  the  roads.  Before  be  bought  them  they  had  machine 
shops  made  up  generally  of  old  tools  and  machinery  that  could  not  be 
worked,  and  they  had  master  mechanics'  salaries  and  superintendents7 
salaries,  and  we  brushed  all  that  away  and  put  the  roads  on  a  good 
footing. 

Senator  MORGAN.  Have  you  got  to  the  last  of  those  roads  that  you 
bought? 


334  GOVERNMENT    DEBT   OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  All  that  I  think  of  at  this  time. 

Senator  MORGAN.  You  sold  all  of  these  roads  to  the  California 
Pacific! 

Mr.  HUNTINGTON.  Yes;  1  think  they  were  consolidated  in  the  Cali- 
fornia Pacific. 

Senator  MORGAN.  Which  became  the  Southern  Pacific  of  California? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  By  contract  and  consolidation? 

Mr.  HUNTINGTON.  My  impression  is  that  Judge  Sanderson  was  living 
when  the  first  consolidation  was  made. 

Senator  MORGAN.  Was  Judge  Sanderson  a  lawyer? 

Mr.  HUNTINGTON.  Yes;  a  very  able  lawyer. 

Senator  MORGAN.  Whose  lawyer  was  he? 

Mr.  HUNTINGTON.  He  was  our  general  legal  adviser.  He  was  the 
head  of  the  supreme  court  in  the  State,  and  was  a  man  of  very  superior 
ability,  and  of  such  unquestionable  integrity  that  we  thought  it  best  to 
get  the  best  talent  in  the  State,  and  we  took  Judge  Sanderson. 

Senator  MORGAN.  All  of  these  roads,  having  been  bought  or  built  by 
the  several  construction  companies,  became  their  property,  subject  to 
the  mortgages  on  them? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  they  were  in  the  ownership  of  the  four  gen- 
tlemen whom  you  have  been  naming  here — Stanford,  Hopkins,  Crocker, 
and  yourself? 

Mr.  HUNTINGTON.  The  California  Pacific  was  not  altogether  in  our 
ownership.  We  got  a  majority  of  the  shares.  We  got  all  the  shares 
in  some  of  the  companies  and  in  some  we  did  not. 

Senator  MORGAN.  But  in  all  of  them  you  got  a  majority  of  the 
shares? 

Mr.  HUNTINGTON.  Yes ;  we  would  not  take  the  companies  unless  we 
had. 

Senator  MORGAN.  And  you  had  the  right  to  control  them  as  stock- 
holders? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  you  consolidated  all  of  them? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  That  consolidation  was  conducted  entirely  by  and 
for  the  construction  companies? 

Mr.  HUNTINGTON.  No ;  I  should  say  for  the  Southern  Pacific  Bail- 
road  Company  more  particularly. 

Senator  MORGAN.  There  had  to  be  two  parties  to  the  bargain? 

Mr.  HUNTINGTON.  Yes ;  but  still  it  was  a  good  deal  the  same  inter- 
est, and  we  wanted  to  reduce  expenses. 

Senator  MORGAN.  You  treated  it  as  a  common  unit  and  put  it  into 
the  Southern  Pacific  Eailroad  Company? 

Mr.  HUNTINGTON.  Yes;  we  consolidated  it. 

Senator  MORGAN.  Leaving  the  mortgages  to  stand  where  they  were? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  And  of  course  in  doing  that  the  property  remained 
liable  for  each  of  the  mortgages  upon  it? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  You  owned,  therefore,  a  majority  of  the  stock  in 
each  of  these  minor  companies? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  How  many  bonds  of  these  minor  companies  did 
you  own  ? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  335 

Mr.  HUNTINGTON.  I  do  not  think  we  owned  any  of  the  bonds.  We 
got  the  stock  of  the  Stockton  and  Copperopolis  Company  and  gave  a 
half  million  dollars  in  5  per  cent  bonds  to  the  people  who  had  $1,000,000 
in  8  per  cent  bonds  and  who  lived  in  Amsterdam.  We  gave  a  half 
million  5  per  cent  bonds  for  the  one  million  of  8  per  cents. 

Senator  MORGAN.  Then  the  bonds  of  all  these  various  companies 
were  not  held  by  the  construction  company! 

Mr.  HUNTINGTON.  No;  I  do  not  think  so.  I  do  not  recollect  our 
having  any  of  them  at  all. 

Senator  MORGAN.  They  were  out  on  the  country? 

Mr.  HUNTINGTON.  Yes,  unless  they  were  absorbed  and  canceled.  I 
think  that  in  the  consolidation  we  gave  Southern  Pacific  bonds  in 
exchange  for  some  of  them.  It  seems  to  me  that  for  the  Anaheim 
branch  we  gave  bonds  of  the  Southern  Pacific  Company. 

Senator  MORGAN.  Are  there  any  of  the  roads  where  you  have  not 
substituted  Southern  Pacific  bonds  for  the  bonds  of  the  minor  com- 
panies? 

Mr.  HUNTINGTON.  Yes;  the  Stockton  and  Copperopolis  road  is  one. 
Those  bonds  are  out  under  that  name.  They  are  not  due. 

Senator  MORGAN.  Have  you  any  idea  of  how  many  Southern  Pacific 
bonds  you  gave  in  exchange  for  the  bonds  of  those  small  companies? 

Mr.  HUNTINGTON.  No;  I  think  that  generally  they  kept  their  bonds, 
and  we  agreed  to  pay  the  interest  on  them  and  they  gave  us  their 
shares.  These  minor  roads  were  almost  all  bankrupt.  That  had  all 
come  from  the  disadvantage  of  working  little  roads  having  all  the 
machinery  of  a  great  corporation,  and  of  course,  as  a  rule,  they  run 
into  bankruptcy. 

Senator  MORGAN.  They  gave  you  their  stock? 

Mr.  HUNTINGTON.  I  would  not  say  that. 

Senator  MORGAN.  You  did  say  it. 

Mr.  HUNTINGTON.  The  California  Pacific  gave  something  for  the 
stock. 

Senator  MORGAN.  About  how  much? 

Mr.  HUNTINGTON.  Ten  or  twelve  per  cent;  but  that  is  a  great  many 
years  ago. 

Senator  MORGAN.  Was  the  California  Pacific  paid  for  in  money,  or 
stock,  or  bonds  of  the  Southern  Pacific? 

Mr.  HUNTINGTON.  The  Southern  Pacific  does  not  control  the  Califor- 
nia Pacific  to  day.  The  California  Pacific  is  an  independent  company. 

Senator  MORGAN.  I  am  talking  about  these  other  little  companies. 
What  did  you  give  in  exchange  for  their  stoek? 

Mr.  HUNTINGTON.  Ten  or  twelve  per  cent. 

Senator  MORGAN.  Did  you  pay  that  in  money  ? 

Mr.  HUNTINGTON.  No;  I  think  not.  I  think  we  made  a  contract 
with  them  to  double  track  the  road  from  Davisville  to  Sacramento. 
They  wanted  us  to  take  the  road,  because  they  had  it  terribly  over- 
mortgaged,  and  we  cut  the  mortgage  down. 

Senator  MORGAN.  After  getting  all  these  little  roads  in  your  grasp 
you  consolidated  them  all,  except  the  California  Pacific,  with  the  South- 
ern Pacific  of  California? 

Mr.  HUNTINGTON.  I  will  say  got  them  into  our  possession,  not  into 
our  grasp.  We  bought  them  and  controlled  them. 

Senator  MORGAN.  I  call  that  a  grasp. 

Mr.  HUNTINGTON.  Maybe  that  is  the  right  word. 

Senator  MORGAN.  You  got  them  into  your  control  and  ownership, 
and  you  put  them  into  the  Southern  Pacific  of  California? 


336  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS, 

Mr.  HUNTINGDON.  Yes. 

Senator  MORGAN.  And  then  the  Southern  Pacific  of  California  went 
into  the  Kentucky  company? 

Mr.  HUNTINGTON.  Yes;  they  sold  their  shares. 

Senator  MORGAN.  And  you  became  the  owners  of  the  stock  in  all 
these  little  roads  which  you  consolidated  and  put  in;  and  then  you  put 
that  stock  into  the  Kentucky  concern — the  Southern  Pacific  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  That  is  the  way  it  occurred;  for  all  of  this  stock 
which  you  put  into  the  Southern  Pacific  or  Kentucky  company  you 
paid  very  little? 

Mr.  HUNTINGTON.  We  did  not  pay  but  little,  and  I  do  not  think  we 
got  any  stock,  or  hardly  any  of  it,  on  these  purchases. 

Senator  MORGAN.  I  do  not  suppose  you  would  get  any,  for  you  had 
all  of  it  consolidated  with  the  Southern  Pacific  of  California. 

Mr.  HUNTINGTON.  That  was  done  in  a  very  broad  and  liberal  spirit. 
I  do  not  believe  that  we  got  any  shares  for  some  of  these  roads.  We 
thought  it  a  great  benefit  to  the  Southern  Pacific  and  to  the  people  along 
the  roads  for  us  to  get  control  of  it. 

Senator  MORGAN.  You  and  Hopkins  and  Stanford  and  Crocker  were 
the  owners  of  a  very  large  majority  of  the  stock  of  the  Southern  Pacific 
of  California'? 

Mr.  HUNTINGTON.  Yes;  we  had  a  large  majority  of  that  stock. 

Senator  MORGAN.  How  much  did  you  four  have  in  the  Southern 
Pacific  of  California? 

Mr.  HUNTINGTON.  The  contract  for  building  the  road  was  made  with 
the  Western  Development  Company,  I  think,  and  they  took  the  bonds. 
I  should  think,  and  the  stock,  I  should  think — some  $40,000,000  of  stock! 

Senator  MORGAN.  How  many  bonds? 

Mr.  HUNTINGTON.  Thirty  eight  million  dollars  of  bonds.  I  think  we 
took  the  bonds.  I  do  not  know  whether  we  took  the  bonds  or  were 
paid  so  much  money  for  the  building  of  the  road ;  but  I  think  the  West- 
ern Development  Company  took  the  bonds  and  stock. 

Senator  MORGAN.     Did  you  take  the  land  grant  also? 

Mr.  HUNTINGTON.  No;  the  bonds  were  mortgaged  on  the  laud  grant. 

Senator  MORGAN.  That  Western  Development  Company  was  the 
company  which  was  building  the  Southern  Pacific  of  California? 

Mr.  HUNTINGTON.  I  think  so.  I  am  pretty  certain  they  set  in  to 
build  it. 

Senator  MORGAN.  Did  they  not  wind  it  up? 

Mr.  HUNTINGTON.  No;  I  think  the  Pacific  Improvement  Company 
took  it  off  their  hands. 

Senator  MORGAN.  The  same  people? 

Mr.  HUNTINGTON.  Not  altogether. 

Senator  MORGAN.  The  great  majority  of  the  Western  Development 
Company  was  owned  by  these  four  men  ? 

Mr.  HUNTINGTON.  Yes ;  we  always  tried  to  keep  a  control  of  these 
things. 

Senator  MORGAN.  The  same  four  men  found  it  convenient  or  neces- 
sary to  transfer  that  contract  for  building  the  Southern  Pacific  of  Cali- 
fornia from  the  Western  Development  to  the  Pacific  Improvement 
Company? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  Did  you  then  wind  up  the  Western  Development 
Company? 

Mr.  HUNTINGDON.  I  think  so. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  337 

Senator  MORGAN.  And  you  took  a  new  start  upon  a  new  company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Who  owned  the  stock  of  the  Western  Development 
Company? 

Mr.  HUNTINGTON.  We  four  men  owned  it  largely.  We  kept  together 
all  the  time.  We  were  railroad  builders  from  the  start  and  had  to  keep 
control.  The  only  salvation  in  these  things  is  to  get  men  who  go  into 
it  to  keep  together. 

Senator  MORGAN.  Through  the  Western  Development  Company  and 
the  Pacific  Improvement  Company  you  have  built  the  Southern  Pacific 
of  California,  so  far  as  it  has  been  built? 

Mr.  HUNTINGTON.  The  company  itself  may  have  done  some  little 
work  outside  of  that.  We  have  some  little  work  now  in  southern 
California  which  I  think  we  are  doing. 

Senator  MORGAN.  Is  it  not  true  that  the  Western  Development 
Company  and  the  Pacific  Improvement  Company  were  organized  for 
the  purpose  of  building  the  Southern  Pacific  road? 

Mr.  HUNTINGTON.  No ;  they  were  organized  for  general  work. 

Senator  MORGAN.  But  they  took  the  contract  for  the  Southern 
Pacific  road  in  succession,  one  after  the  other? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Then  you  wound  up  and  disincorporated  the 
Western  Development  Company? 

Mr.  HUNTINGTON.  No;  I  do  not  think  the  Western  Development 
Company  has  ever  been  disincorporated. 

Senator  MORGAN.  It  has  been  wound  up  and  ceased  work? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Then  you  took  to  the  Pacific  Improvement  Com- 
pany what  remained  to  be  done  and  the  assets  of  the  Western  Develop- 
ment Company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  They  were  just  transferred  to  a  new  company? 

Mr.  HUNTINGTON.  Yes;  I  do  not  see  any  other  way  to  do  it. 

Senator  MORGAN.  The  Western  Development  Company  and  the 
Pacific  Improvement  Company  together  (and  one  as  the  successor  of 
the  other)  have  built  the  Southern  Pacific  Company  in  California? 

Mr.  HUNTINGTON.  Yes;  in  the  main.   Nearly  all,  I  should  say. 

Senator  MORGAN.  And  got  all  the  stock  and  all  the  bonds  of  the 
Southern  Pacific  Company  after  building  it? 

Mr.  HUNTINGTON.  Not  all  the  stock.    They  got  all  the  bonds. 

Senator  MORGAN.  How  many? 

Mr.  HUNTINGTON.  Thirty-eight  million  dollars. 

Senator  MORGAN.  How  much  stock  have  they  got? 

Mr.  HUNTINGTON.  I  think  $40,000,000. 

Senator  MORGAN.  How  much  stock  was  left  that  they  did  not  get? 

Mr.  HUNTINGTON.  I  think  the  Southern  Pacific  of  California  was 
capitalized  at  $60,000,000. 

Senator  MORGAN.  How  much  stock  has  ever  been  issued  by  that 
company  ? 

Mr.  HUNTINGTON.  I  think  something  over  $50,000,000.  We  have 
a  much  greater  mileage,  I  think,  than  in  the  Southern  Pacific  of  Cali- 
fornia. There  may  be  fifteen  or  sixteen  or  seventeen  hundred  miles. 

Senator  MORGAN.  There  still  remains  stock  to  be  issued  by  that 
company  ? 

Mr.  HUNTINGTON.  The  company  can  increase  its  stock  under  the 
law  of  the  State. 
PR 22 


338  GOVERNMENT   DEBT    OF    THE    PACIFIC   RAILROADS. 

Senator  MORGAN,  And  you  are  working  now  to  improve  and  extend 
the  property  of  the  company? 

Mr.  HUNTINGTON.  Yes;  we  are  taking  care  of  it. 

Senator  MORGAN.  Do  you  still  hold  those  bonds? 

Mr.  HUNTINGTON.  No 5  I  am  sorry  to  say  we  have  not  a  dollar  of  the 
$38,000,000  of  bonds. 

Senator  MORGAN.  And  you  transferred  the  stock  to  the  Kentucky 
company  ? 

Mr.  HUNTINGTON.  It  was  transferred  to  the  Southern  Pacific  company. 

Senator  MORGAN.  So  you  got  entirely  rid  of  your  California  property? 

Mr.  HUNTINGTON.  No;  1  have  the  Coton  House,  where  I  live  in  the 
winter. 

Senator  MORGAN.  I  am  talking  about  this  stock  of  the  Southern 
Pacific  of  California.  It  has  been  transferred  to  Kentucky? 

Mr.  HUNTINGTON.  The  franchise  is  a  Kentucky  franchise. 

Senator  MORGAN.  Subject  to  Kentucky  laws? 

Mr.  HUNTINGTON.  Yes;  and  I  am  glad  it  is. 

Senator  MORGAN.  I  am,  too.  On  that  stock,  or  on  the  lease  of  the 
property  (you  do  not  know  which),  you  are  drawing  dividends — getting 
lease  money  or  track  hire  from  the  Kentucky  company? 

Mr.  HUNTINGTON.  For  which  ? 

Senator  MORGAN.  For  the  Southern.  Pacific  of  California. 

Mr.  HUNTINGTON.  They  own  the  shares,  and  of  course  whatever 
goes  to  the  shares  go  to  them.  They  are  the  proprietors.  There  is 
nothing  singular  about  that.  Whatever  profits  there  were  followed 
the  shares;  but  I  am  sorry  to  say  we  have  had  no  dividends. 

Senator  MORGAN.  You  do  not  want  to  have  any? 

Mr.  HUNTINGTON.  If  we  had  any  way  of  getting  dividends  and 
keeping  up  the  property  at  the  same  time,  we  would  be  very  glad  to 
take  the  dividends. 

Senator  MORGAN.  But  still  you  had  more  than  was  necessary  to 
keep  the  property  up,  and  you  expended  it  in  extending  the  property? 

Mr.  HUNTINGTON.  That  is  construction  account;  another  account 
entirely. 

Senator  MORGAN.  You  consider  it  such  good  property  that  you  are 
extending  it  as  well  as  improving  it? 

Mr.  HUNTINGTON.  I  think  very  well  of  that  property.  California  is 
one  of  the  best  States  in  the  Union.  It  has  now  1,500,000  of  people; 
and  25,000,000  of  people  could  live  there  and  get  fat.  It  is  the  best 
State  in  the  Union  to  live  in;  and  I  believe  that,  if  we  hold  on  to  that 
property  twenty-five  or  thirty  years,  there  will  not  be  as  good  a  rail- 
road property  in  the  United  States. 

Senator  MORGAN.  Will  it  be  as  good  as  the  Central  Pacific  ? 

Mr.  HUNTINGTON.  Yes;  because  it  runs  through  a  good  country;  we 
even  "  builded  better  than  we  knew." 

Senator  MORGAN.  I  think  you  stated  that  you  had  no  personal  inter- 
est in  the  Central  Pacific  ? 

Mr.  HUNTINGTON.  Yes ;  I  have  the  same  interest  in  it  as  ever. 

Senator  MORGAN.  That  is,  a  sentimental  interest;  but  I  am  talking 
about  a  money  interest.  How  many  shares  have  you  in  it? 

Mr.  HUNTINGTON.  Not  more  than  6,000  shares. 

Senator  MORGAN.  You  have  had  more? 

Mr.  HUNTINGTON.  I  do  not  know  that  I  ever  had. 
Senator  MORGAN.  Have  you  ever  sold  any  stock  of  the  Southern 
Pacific  of  California  or  of  any  of  these  companies,  or  any  of  the  stock 
of  the  Kentucky  Company  as  low  as  19  cents  on  the  dollar? 


GOVERNMENT   DEBT   OF    THE    PACIFIC    RAILROADS.  339 

Mr.  HUNTINGDON.  I  do  not  think  that  I  ever 'sold  them  at  any  price. 

Senator  MORGAN.  You  have  always  held  that  stock  at  a  higher  price 
than  that1? 

Mr.  HUNTINGTON.  I  could  not  sell  it  above  the  market  price. 

Senator  MORGAN.  There  is  none  of  it  for  sale  at  50  cents  on  the  dol- 
lar? 

Mr.  HUNTINGTON.  Yes;  I  will  let  the  Senator  have  all  he  wants  at 
that  price. 

Senator  MORGAN.  I  do  not  want  to  go  into  debt  for  it. 

Mr.  HUNTINGTON.  I  made  my  money  by  going  in  debt. 

Senator  MORGAN.  I  thought  you  made  the  most  of  it  by  paying  your 
debts.  What  is  the  largest  amount  of  stock  that  you  eyer  owned  in  the 
Central  Pacific  at  any  time? 

Mr.  HUNTINGTON.  I  never  owned  very  much.  I  owned  some  stock 
in  the  Contract  and  Finance  Company. 

Senator  MORGAN.  I  am  talking  about  the  Central  Pacific  Company. 

Mr.  HUNTINGTON.  I  would  not  be  positive  that  I  ever  had  more  than 
a  couple  of  thousand  shares. 

Senator  MORGAN.  You  have  6,000  shares  now. 

Mr.  HUNTINGTON.  I  was  thinking  about  old  times. 

Senator  MORGAN.  Two  thousand  shares  is  about  all  you  owned? 

Mr.  HUNTINGTON.  Until  a  long  time  after. 

Senator  MORGAN.  When  did  you  become  the  owner  of  6,000  shares? 

Mr.  HUNTINGTON.  I  do  not  know;  it  may  have  been  that  the  Con- 
tract and  Finance  Company  may  have  distributed  the  shares  of  the 
Central  Pacific  that  it  owned.  The  Contract  and  Finance  Company 
got  money  and  paid  all  its  debts,  and  it  may  then  have  distributed 
some  shares. 

Senator  MORGAN.  Did  you  say  that  the  0,000  shares  which  you  now 
own  were  distributed  to  you  by  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  They  may  have  been. 

Senator  MORGAN.  Have  you  ever  bought  any  of  the  Central  Pacific 
in  the  market? 

Mr.  HUNTINGTON.  I  do  not  believe  I  have. 

Senator  MORGAN.  None  at  all? 

Mr.  HUNTINGTON.  I  do  not  recollect  ever  buying  any,  and  I  did  not 
sell  any  except  when  I  wanted  money. 

Senator  MORGAN.  You  have  sold  some  of  the  stock  of  your  personal 
holding? 

Mr.  HUNTINGTON.  I  think  so. 

Senator  MORGAN.  How  much  of  it  have  you  sold! 

Mr.  HUNTINGTON.  Not  a  great  deal. 

Senator  FRYE.  Did  not  Mr.  Huntington  go  over  that  yesterday?  He 
said  he  sold  stock  at  19. 

Mr.  HUNTINGTON.  I  do  not  know  how  much ;  it  is  years  ago. 

Senator  MORGAN.  You  have  got  the  6,000  shares  of  Central  Pacific 
stock  now,  and  you  think  that  you  got  it  from  the  Contract  and  Finance 
Company;  and  you  sold  some  stock  just  after  the  passage  of  the  Thur- 
man  Act  at  19  cents  on  the  dollar? 

Mr.  HUNTINGTON.  I  did  not  say  I  sold  it  just  after  the  passage  of 
the  Thurnian  Act.  I  said  that  I  sold  some,  but  I  can  not  locate  the  time. 

Senator  MORGAN.  You  did  locate  it  yesterday  as  just  after  the  pas- 
sage of  the  Thurman  Act. 

Mr.  HUNTINGTON.  I  said  it  might  have  been  after,  or  it  might  have 
been  before. 

Senator  MORGAN.  When  was  it? 


340  GOVERNMENT   DEBT    OP   THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  do  not  know.  I  can  find  out  from  New  York 
when  it  was  that  the  price  of  the  stock  was  19 ;  and  that  is  the  time  I 
sold. 

Senator  MORGAN.  You  did  not  sell  part  of  the  6,000  shares  which 
you  have  got  now? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Where  did  you  get  these  6,000  shares? 

Mr.  HUNTINGTON.  I  may  have  got  them  from  the  Contract  and 
Finance  Company. 

Senator  MORGAN.  So  that  you  have  got  more  than  6,000  shares  from 
the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  I  do  not  think  so;  but  I  may  .have  got  them  from 
that  company. 

Senator  MORGAN.  And  you  do  not  know  how  much  you  sold  at  19 
cents  on  the  dollar? 

Mr.  HUNTINGTON.  I  do  not. 

Senator  MORGAN.  And  you  never  have  bought  any  of  these  shares! 

Mr.  HUNTINGTON.  I  do  not  believe  that  I  ever  bought  a  share  of 
the  Central  Pacific  in  the  market. 

Senator  FRYE.  Did  you  not  testify  yesterday  that  you  took  Crocker's 
stock  when  he  went  away  ? 

Mr.  HUNTINGTON.  Yes;  when  he  went  to  Europe  we  bought  his 
stock  at  12£  cents  on  the  dollar.  He  went  to  Europe  and  was  gone 
something  like  two  years,  and  when  he  came  back  I  asked  him  to  take 
back  his  stock.  He  did  not  want  to  take  it  back,  but  I  told  him  that 
we  would  like  to  have  him  come  back  into  the  company  and  go  to 
work ;  and  he  finally  did  so. 

Senator  MORGAN.  So  he  took  his  stock  back? 

Mr.  HUNTINGTON.  Yes;  he  took  his  stock  back. 

Senator  MORGAN.  Inasmuch  as  you  are  totally  unable  to  recollect 
about  this  stock,  have  you  books  that  will  inform  us  how  much  of  that 
stock  you  sold  at  19  cents  and  when  you  sold  it? 

Mr.  HUNTINGTON.  I  do  not  know  that  I  can  tell  by  my  books;  but  I 
can  tell  by  the  stock  list  in  New  York.  I  can  tell  by  the  stock  list- 
when  the  price  was  19. 

Senator  MORGAN.  I  have  some  questions  to  ask  you  as  to  the  state- 
ment filed  in  writing  relating  to  the  Pacific  Eailroad  Commission.  You 
said: 

I  observe  that  the  commission  refers  to  the  suits  which  were  brought  in  California 
by  Sam  Brannon  and  others,  as  stockholders  of  the  Central  Pacific  Railroad 
Company. 

I  have  already  stated  that  suits  of  a  similar  character  were  brought  here  in  New 
York,  where  they  were  under  my  direct  observation.  The  suits  were  defended  in  all 
the  courts,  and  we  were  absolutely  and  entirely  successful,  and  the  plain  tiffs  were 
entirety  defeated  by  decisions  of  the  highest  courts  of  the  State  of  New  York.  As  to 
the  suits  commenced  in  California,  I  can  only  say  that  if  they  had  been  under  my 
observation  I  would  have  fought  them  in  the  same  way  and  with  the  same  results; 
but  the  suits  were  commenced  for  blackmail,  and  settled  by  others  than  myself,  and 
for  political  reasons  aboiiu  which  I  knew  and  cared  nothing,  and  when  I  heard  of  it 
I  disapproved  the  settlement. 

Who  settled  these  suits? 

Mr.  HUNTINGTON.  Governor  Stanford,  as  I  understand. 

Senator  MORGAN*  For  political  reasons? 

Mr.  HUNTINGTON.  The  Governor  was  never  much  in  railroads  and 
was  almost  always  in  politics. 

Senator  MORGAN.  Why  do  you  say  that  the  suits  were  commenced  for 
blackmail? 


GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS.  341 

Mr.  HUNTINGDON.  Because  there  were  no  good  reasons  why  they 
should  be  commenced.  They  had  complaints  charging  us  with  every- 
thing iu  the  world,  and  I  said  to  tlfein,  "  Go  to  the  courts  and  prove  it." 
I  rather  flatter  myself  on  my  life  record ;  1  am  pleased  with  it. 

Senator  MORGAN.  Was  that  the  case  of  Sam  Brannon  and  R.  O.  Ives, 
plaintiffs  against  the  Central  Pacific  Eailroad  Company  of  California 
and  other  defendants! 

Mr.  HUNTINGTON.  I  do  not  know  about  Ives.  I  have  always  known 
it  as  the  Sam  Brannon  case. 

Senator  MORGAN.  I  have  here  a  copy  of  what  purports  to  be  the  bill 
and  answer  of  this  case.  This-  is  the  suit  to  which  you  refer  as  a  black- 
mailing suit,  and  as  making  accusations  against  you  which  were  entirely 
unfounded  and  wrong.  That  is  the  suit  you  refer  to,  is  it  not  ? 

Mr.  HUNTINGTON.  Yes;  I  only  remember  one  Sam  Brannon  suit. 

Senator  MORGAN.  In  that  bill  it  is  charged  that  the  total  amount 
which  you  four  gentlemen  received  in  aid  of  the  construction  of  the 
Central  Pacific  road  was  $156,825,360.  There  is  one  item  in  that  which 
is  probably  very  much  exaggerated — the  item  of  laud — and  I  would 
like  to  find  out  about  it. 

Mr.  HUNTINGTON.  I  will  tell  you  all  that  I  know. 

Senator  MORGAN.  They  say  that  the  value  of  the  lands  granted  by 
the  United  States  was  $50,208,000.  Is  that  an  exaggeration? 

Mr.  HUNTINGTON.  I  should  say  so. 

Senator  MORGAN.  How  much  of  it  is  an  exaggeration? 

Mr.  HUNTINGTON.  It  is  pretty  much  all  an  exaggeration. 

Senator  MORGAN.  The  lands  were  worth  something? 

Mr.  HUNTINGTON.  The  Central  Pacific  got  somewhere  above  7,000,000 
acres  of  land. 

Senator  MORGAN.  Is  that  all? 

Mr.  HUNTINGTON.  It  was  not  eight  millions.  The  California  Pacific 
got  3,000,000  acres,  but  that  was  better  land.  Our  7,000,000  acres  was 
mostly  in  Nevada  and  Utah.  Have  you  ever  been  there,  Senator? 

Senator  MORGAN.  Yes. 

Mr.  HUNTINGTON.  Well,  what  do  you  think  that  land  is  worth? 

Senator  MORGAN.  I  have  no  idea,  Mr.  Huntington.  I  suppose  that 
when  they  get  water  to  irrigate  it,  it  is  as  fine  land  as  any  in  the  world. 

Mr.  HUNTINGTON.  But  there  is  no  water  there;  that  is  the  trouble. 
You  know  what  Uncle  Ben  Wade  said  about  that? 

Senator  MORGAN.  No ;  I  do  not. 

Mr.  HUNTINGTON.  He  was  going  through  there  on  the  cars  one  day 
when  he  met  an  old  Ohioan  who  had  same  cattle  out  there.  He  had 
1,000  head  of  cattle.  He  was  an  old  neighbor  of  Mr.  W  ade's  iu  Ohio,  and 
he  got  quite  excited  over  the  country,  and  said,  "If  we  only  had  good 
water  and  good  society,  there  is  no  better  country  in  the  world;"  and 
Mr.  Wade  said,  "Just  the  two  things  they  lack  in  hell."  I  thought 
that  a  very  good  story. 

Senator  MORGAN.  It  seems  from  the  census  reports  that  they  are 
building  that  country  up  pretty  fast? 

Mr.  HUNTINGTON.  The  land  is  worth  very  little. 

Senator  MORGAN.  I  have  here  an  official  statement  from  Mr.  Carroll  P. 
Wright,  census  commissioner.  It  has  an  important  summary,  which  I 
will  have  put  into  the  record,  calling  your  attention  to  only  a  few  figures. 
It  shows  the  increase  in  the  value  of  real  and  personal  property  in  speci- 
fied States  and  Territories  from  1870  to  1890.  In  States  and  Territories 
which  feel  the  influence  of  the  railroad  system,  showing  the  wonderful 
increase  which  railroads  and  the  Almighty  together  have  contributed 


342 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


to  the  property  of  this  country.  For  instance,  we  will  take  Arizona. 
There  is  no  other  railroad  line  but  yours  there? 

Mr.  HUNTINGDON.  The  Atchison,  Topeka  and  Sante  Fe  runs  through 
it. 

Senator  MORGAN.  The  value  of  real  and  personal  property  in  Arizona 
from  1870  to  1880  was  $37,559,000? 

Mr.  HUNTINGTON.  A  State  larger  than  New  York. 

Senator  MORGAN.  In  189(Tit  ran  up  to  $147,880,000,  being  an  increase 
of  361  per  cent. 

Mr.  HUNTINGTON.  I  am  not  much  surprised  at  that.  That  is  toward 
the  lower  Gila;  and  there,  as  I  stated,  "We  builded  better  than  we 
knew." 

Senator  MORGAN.  The  increase  of  the  number  of  people  in  Arizona 
from  1870  to  1880  was  30,782,  and  that  number  had  increased  in  1890  by 
19,180,  an  increase  of  47.3  in  population.  Then,  take  Utah.  In  1880 
the  valuation  of  its  real  and  personal  property  was  $97,847,005,  and  in 
1890  it  was  $235,411,274.  The  increase  in  population  from  1870  to  1880 
was  57,177,  and  the  increase  from  1880  to  1890  was  63,942. 

Senator  FRYE.  Does  that  table  give  the  increase  in  the  valuation  of 
lands  in  Nevada? 

Senator  MORGAN.  Yes;  in  every  one  of  the  States  under  the  influ- 
ence of  railroads. 

Senator  Morgan  put  the  paper  in  evidence,  as  follows : 

DEPARTMENT  OF  THE  INTERIOR,  CENSUS  DIVISION, 

Washington,  February  17,  1896. 

SIR:  Your  letter  of  the  15th  instant,  addressed  to  Commissioner  Wright,  asking  a 
tabulated  statement  relative  to  the  increase  in  wealth  and  population  of  a  number 
of  States  directly  affected  by  the  transcontinental  lines  of  railroad,  was  delivered  at 
this  office  about  noon  Saturday.  In  order  that  the  facts  desired  may  be  in  your 
hands  by  the  time  specified,  I  at  once  directed  the  preparation  of  the  statements, 
and  have  the  honor  to  transmit  them  herewith.  This  will  explain  why  your  letter 
has  not  had  the  Commissioner's  personal  attention. 

Very  respectfully,  GEO.  S.  DONNELL, 

Chief  of  Division. 
Hon.  JOHN  T.  MORGAN, 

United  States  Senate. 

Increase  in  true  valuatian  of  real  and  personal  property  of  specified  States  and  Territories, 

1870  to  189.0. 


States  and  Territories. 

1880  to  1890. 

1870  to  1880. 

Amount. 

Per  c  ent. 

Amount. 

Per  cent. 

$899  851,927 
566,  348,  333 
835,  902,  945 

113.6 
32.9 
53.5 

545.9 

231.4 
136.7 
155.3 
59.1 
1032.  5 
214.8 
377.5 
373.5 
361.0 
206.5 
15.6 
1127.  0 
283.4 
88.7 
616.9 

$563,  090,  410 
1,003,355,250 
277,  077,  103 

112,  400,  248 

315,  722,  517 
571,  107,  986 
665,  947,  453 
129,  605,  309 
24,  815,  478 
46,  983,  252 
219,  756,  697 
17,  650,  207 
37,  559,  209 
97,  840,  005 
124,  865,  988 
48,  437,  836 
102,  441,  068 
704,  232,  983 
22,  447,  319 

245.9 
139.8 
21.6 

1,  873.  3 

457.  5 
302.2 
419 
89.5 
165.3 
671.1 
1099.  0 
55.2 
940.0 
611.5 
402.8 
346.0 
197.0 
110.2 
374.1 

Iowa 

North  Dakota 

J       644,  147,  805 

890,  685,  514 
1,  039,  343,  501 
1,  280,  576,  766 
169,  147,  422 
413,  135,  209 
115,  773,  710 
905,  712,  267 
182,  459,  897 
147,  880,  976 
235,  411,  234 
24,  323,  668 
698,  698,  726 
436,  396,  194 
1,  190,  733,  627 
178,  896,  591 

South  Dakota  

Nebraska  .        

Kansas  .                            

Texas  

Arkansas 

Montana 

Colo  i  ado  

New  Mexico  .........  

Arizona    ..... 

Utah  

Nevada 

Washington 

California 

Idaho  

GOVERNMENT   DEBT   OP   THE    PACIFIC   RAILROADS.  343 

Increase  in  population  of  specified  States  and  Territories,  1870  to  S890. 


States  and  Territories. 

1880  to  1890. 

1870  to  1880. 

Number. 

Per  cent. 

Number. 

Per  cent. 

521,  053 
287,  281 
510,  804 

|  a  376,  350 

606,  508 
431,  000 
643,  774 
325,  654 
93,  000 
39,  916 
217,  871 
34,  028 
19,  180 
63,  942 
c  16,  505 
51,  775 
274,  274 
138,  999 
343,  436 

66.74 
17.68 
23.56 

a  278.  41 
134.06 
43.27 
40.44 
40.58 
237.  49 
192.  01 
112.  12 
28.46 
47.  43 
44.42 
c  26.  51 
158.  77 
365.  13 
79.53 
39.72 

341,  067 
430,  595 
447,  085 

6  120,  996 

329,  409 
631,  697 
773,  170 
318,  054 
18,564 
11,  671 
154,  463 
27,  691 
30,  782 
57,  177 
19,  775 
17,  611 
51,  161 
83,  845 
304,  447 

77.57 
36.06 
25.97 

6853.23 

267.  83 
173.  35 
94.45 
65.65 
90.14 
128.  CO 
387.  47 
30.14 
318.  72 
65.88 
46.54 
117.  41 
213.  57 
92.22 
54.34 

North  Dakota 

South  Dakota 

Texas           ..... 

"Utah                                                                           .            

Idaho 

Washington  

Oregon  

California         .                                        

a  North  and  South  Dakota  combined.  Apportioning  the  population  of  Dakota  Territory  in  1889, 
North  Dakota  (36,909  in  1880)  increased  145,810,  or  395.05  per  cent  and  South  Dakota  (98,268  in  1880) 
increased  230,540,  or  234.60  per  cent. 

6  Dakota  Territory. 

c  Decrease. 

Senator  MORGAN.  How  did  you  dispose  of  the  lands  granted  to  the 
California  Pacific? 

Mr.  HUNTINGTON.  In  building  the  Southern  Pacific  of  California. 
The  lands  could  be  irrigated  by  the  Colorado,  the  Gila,  and  the  Salt 
rivers;  and  that  property  is  going  to  be  the  garden  spot  of  the  United 
States  from  White  Elver  to  Seneca  Canyon. 

Senator  MORGAN.  You  thought  so  much  of  it  that  you  took  all  your 
personal  earnings  from  the  roads  you  built  in  Virginia  and  put  them  in 
there? 

Mr.  HUNTINGTON.  Not  altogether.  I  put  a  couple  of  million  of 
dollars  that  I  made  into  these  roads. 

Senator  MORGAN.  Your  big  interest  then,  as  far  as  railroads  are  con- 
cerned, is  the  Southern  Pacific  line? 

Mr.  HUNTINGTON.  It  is  in  the  line  from  Portland  south. 

Senator  MORGAN.  That  great  sweep  of  railroad  embraces  the  great 
interest  which  you  hold  ? 

Mr.  HUNTINGTON.  My  great  interest  in  railroads  is  west  of  the 
Mississippi. 

Senator  MORGAN.  It  is  between  Portland  and  New  Orleans!  It  is 
on  these  lines?  It  is  all  located  right  there? 

Mr.  HUNTINGTON.  Yes;  it  is  all  good  property. 

Senator  MORGAN.  What  have  you  done  with  the  Central  Pacific 
lands? 

Mr.  HUNTINGTON.  We  have  sold  all  the  lands  we  could,  and  have  got 
up  to  this  time  less  than  $8,000,000  for  it,  we  paying  ourselves  for  the 
surveying  and  probably  other  expenses,  so  that  we  have  not  made  any- 
more than  that  out  of  the  land.  We  got  no  laud  in  the  plains  in  Cali- 
fornia. That  land  was  nearly  all  covered  in  old  Spanish  grants,  and 
the  land  which  we  got  was  in  the  mountains,  and  in  Nevada  and  Utah. 
We  did  not  get  much  land  in  Utah,  because  the  lands  in  the  mountains 
west  of  Salt  Lake  are  worth  very  little.  There  is  some  very  valuable 
land  in  Bear  Kiver  Valley  east  of  the  Wahsatch  Mountains,  and  right 


344  GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS. 

off  tlie  Wahsatch  from  Webber  arid  Ogden  and  Bear  rivers.    There, 
there  is  a  strip  of  valuable  laud,  80  miles  wide. 
'  Senator  MORGAN.  Have  you  sold  that  land  ? 

Mr.  HUNTINGTON.  We  did  not  have  much  land  there.  It  went  all 
to  the  Union  Pacific.  We  bought  that  road  from  the  Union  Pacific. 

Senator  MORGAN.  How  much  did  you  get  for  all  the  land  you  sold! 

Mr.  HUNTINGTON.  I  suppose  that  for  the  land  we  sold  we  have  got 
at  the  average  of  $2  an  acre. 

Senator  FRYE.  At  what  amount  do  you  put  the  full  money  value  of 
all  the  lands  which  the  Central  Pacific  received  from  the  United  States? 

Mr.  HUNTINGTON.  I  would  not  put  it,  I  think,  at  $5,000,000.  That 
amount,  paid  in,  for  all  the  land  would  be  a  sum  on  which  the  sales  of 
the  land  would  never  keep  up  the  interest. 

Senator  MORGAN.  You  have  spoken  very  enthusiastically  of  all  the 
value  which  your  road  added  to  the  land  of  the  people  in  California? 

Mr.  HUNTINGTON.  Yes,  but  there  is.  Where  water,  and  soil,  and 
climate  come  together. 

Senator  MORGAN.  There  is  water,  and  soil,  and  climate  on  a  good 
deal  of  the  laud  which  you  have  got? 

Mr.  HUNTINGTON.  Not  in  Nevada.  Across  Promontory  Mountain 
you  get  into  the  Pequod  Mountains  and  the  Cedar  Mountains,  and  I 
do  not  think  we  ever  sold  any  land  there  except  a  little  which  we  got 
in  Humboldt  Yalley.  There  we  have  sold  some;  but  when  we  get  out 
of  the  valley  on  the  mountains  the  land  is  not  worth  anything. 

Senator  MORGAN.  Whatever  value  is  added  by  the  railroads  to  any 
of  the  land  is  equally  added  to  yours? 

Mr.  HUNTINGTON.  No  doubt  the  fact  of  the  railroad  being  there  has 
made  the  half  of  the  Government  lands  worth  four  times  as  much  as 
the  whole  of  them  were  worth  before. 

Senator  MORGAN.  And  the  same  for  your  land? 

Mr.  HUNTINGTON.  Yes.  The  half  that  the  Government  kept  was 
worth  four  times,  with  the  railroad,  more  than  it  was  worth  when  there 
was  no  railroad. 

Senator  MORGAN.  Besides  that,  you  gentlemen  have  got  from  the 
Government  a  pretty  large  land  grant  on  the  Southern  Pacific  line? 

Mr.  HUNTINGTON.  We  did  get  some  good  land  in  the  San  Joaquin 
Valley;  not  much.  Then  we  got  to  theMojave  Desert.  I  think  we  are 
going  to  have  some  good  land  from  White  River.  I  think  we  will  get 
water  there  from  the  Colorado  Eiver,  and  make  the  land  valuable,  but 
up  to  the  present  time  we  would  have  taken  25  cents  an  acre  for  it. 

Senator  MORGAN.  Some  of  the  best  lands  in  Alabama  have  sold  at 
public  sale  for  15  cents  an  acre  and  you  can  not  get  them  now  for  $500 
an  acre.  You  got  some  land  between  San  Francisco  and  the  California 
line  ? 

Mr.  HUNTINGTON.  The  California  and  Oregon  grant  was  a  grant 
which  we  did  not  get.  The  parties  who  got  it  undertook  to  build  the 
road  and  failed,  and  we  took  it  from  them  and  completed  the  road. 

Senator  MORGAN.  You  got  the  land? 

Mr.  HUNTINGTON.  Yes;  that  land  is  worth  more. 

Senator  MORGAN.  So  that,  taking  it  altogether,  including  the  Central 
Pacific  line  and  the  lines  from  Oregon  south  to  San  Francisco  and  from 
San  Francisco  south  through  Arizona 

Mr.  HUNTINGTON.  We  do  not  get  any  land  in  Arizona. 

Senator  MORGAN.  You  stop  at  Yuma,  do  you? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Including  all  of  these  lauds  together,  the  coinpa- 


GOVERNMENT   DEBT    OP   THE    PACIFIC    RAILROADS.  345 

nies  which  you  now  own  and  control  have  received  from  the  Govern- 
ment of  the  United  States  about  how  many  million  acres? 

Mr.  HUNTINGTON.  I  should  say  15,000,000  or  16,000,000. 

Senator  MORGAN.  Is  it  not  nearer  25,000,000? 

Mr.  HUNTINGTON.  No  5  I  do  not  think  we  got  that  much.  I  think 
the  Central  Pacific  got  7,000,000,  the  Oregon  and  California  about 
3,000,000,  and  I  doubt  whether  the  Southern  Pacific  got  more  than 
5,000,000  or  6,000,000.  The  question  of  our  lands  is  in  the  courts  there. 

Senator  MORGAN.  You  say  that  you  have  sold  about  $8,000,000  worth 
of  the  Central  Pacific  land? 

Mr.  HUNTINGTON.  Yes;  about  that. 

Senator  MORGAN.  Did  you  divide  these  sales  in  dividends  on  the 
stock  ? 

Mr.  HUNTINGTON.  No;  we  issued  a  land-grant  bond  of  $10,000,000, 
and  when  we  sold  land  we  redeemed  the  bonds. 

Senator  MORGAN.  What  did  you  issue  land  grant  bonds  for? 

Mr.  HUNTINGTON.  In  building  the  Central  Pacific  the  contract  was 
that  the  Contract  and  Finance  Company  should  have  so  much  money 
and  so  much  stock;  gold  went  up  so  high  that  the  money  which  we 
received  from  the  sale  of  bonds  fell  short,  and  so  the  Central  Pacific 
issued  land-grant  bonds  and  paid  the  Contract  and  Finance  Company 
the  balance  which  was  due  it. 

Senator  MORGAN.  Then  you  took  the  bonds  of  the  United  States 
which  were  issued  to  you,  and  you  sold  the  lands  which  had  been 
granted  to  you,  and  you  got  money  enough  to  make  up  the  difference 
between  the  gold  and  the  par? 

Mr.  HUNTINGTON.  That  is  not  fairly  stated. 

Senator  MORGAN.  State  it  fairly  yourself. 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  agreed  to  do 
the  work  for  so  much  assets,  and  went  to  work  and  built  the  road.  In 
doing  that  gold  advanced.  When  we  commenced,  gold  was  not  at  a 
premium;  but  it  went  up  so  that  we  paid  $222  in  currency  for  $100  in 
gold.  We  paid  for  all  the  work,  and  all  the  lumber  and  material  in 
California,  in  gold.  I  know  that  gold  was  worth  so  much,  and  that 
the  work  to  be  done  cost  so  much. 

Senator  MORGAN.  Did  you  not  know  how  much  gold  you  would  have 
to  use  in  the  work? 

Mr.  HUNTINGTON.  We  did  not  expect  to  have  to  pay  $222  in  currency 
for  $100  in  gold.  I  sold  Government  bonds  as  low  as  85  for  currency, 
in  order  to  buy  gold. 

Senator  MORGAN.  I  am  not  asking  about  those  bonds;  I  am  asking 
about  what  you  did  with  the  money  you  got  for  the  land? 

Mr.  HUNTINGTON.  The  Central  Pacific  paid  it  out  for  building  the 
road. 

Senator  MORGAN.  In  addition  to  the  subsidy  which  yongot  in  bonds, 
and  in  addition  to  the  money  which  you  got  for  the  first-mortgage 
bonds,  you  got  the  proceeds  of  the  sales  of  land  to  the  amount  of 
$8,000,000? 

Mr.  HUNTINGTON.  What  was  the  grant  for,  Senator  Morgan,  but  to 
build  the  road? 

Senator  MORGAN.  You  can  not  stop  to  argue  with  me,  Mr.  Hunting- 
ton,  when  I  am  asking  you  a  question.  I  shall  ask  you  that  question 
again,  and  I  want  you  to  answer  it.  You  may  try  to  dodge  as  much 
as  you  please,  but  you  must  answer. 

Senator  FRYE.  Mr.  Huntington  has  a  right  to  answer  in  his  own  way. 

Senator  MORGAN.  But  he  has  no  right  to  make  an  argument  in 
answering. 


346  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  HUNTINGTON.  I  would  like  to  have  Senator  Morgan  know  all 
that  I  know  about  this. 

Senator  MORGAN.  I  would  be  mighty  glad  to  know  all  that  you  know 
about  it. 

Mr.  HUNTINGTON.  I  wish  you  did. 

Senator  MORGAN.  Come  back  to  the  question.  What  did  you  do  with 
the  $8,000,000  which  you  got  for  the  land? 

Mr.  HUNTINGTON.  We  paid  it  for  building  the  road,  and,  as  I  recol- 
lect— and  you  refreshed  my  mind  the  other  day  when  you  read  that  the 
contract  was  for  so  much  money  and  so  much  stock— in  selling  the  com- 
pany's bonds  and  the  Government  bonds  we  did  not  get  as  much  money 
as  we  agreed  to  pay,  on  account  of  the  high  price  of  gold,  and  therefore 
we  issued  a  mortgage  on  the  lands,  and  gave  the  money  derived  from 
that  mortgage  to  build  the  road. 

Senator  MORGAN.  On  what  lands'? 

Mr.  HUNTINGTON.  On  the  lands  of  the  Central  Pacific;  and  the 
money  was  given  to  the  Contract  and  Finance  Company. 

Senator  MORGAN.  Did  not  the  Government  give  the  Central  Pacific 
Company  as  much  as  it  agreed  to  give? 

Mr.  HUNTINGTON.  Yes;  the  Government  agreed  to  give  so  much  land 
and  so  much  bonds.  The  Government  did  not  give  us  any  more  than 
it  agreed  to  give  us,  and  we  did  not  pay  any  more  than  we  agreed  to 
pay. 

Senator  MORGAN.  The  Government  did  not  give  you  money  at  all? 

Mr.  HUNTINGTON.  No;  the  Government  gave  us  the  bonds  and  the 
lands.  The  Central  Pacific  made  a  contract  with  the  Contract  and 
Finance  Company  to  build  the  road  for  so  much  money  and  so  much  of 
its  own  stock,  The  Central  Pacific  sold  its  own  first-mortgage  bonds 
and  the  Government  bonds  and  did  not  get  gold  enough  to  pay  what 
it  agreed  to  pay  in  gold  to  the  Contract  and  Finance  Company,  because 
gold  and  currency  parted  after  the  contract  was  made.  That  being  so, 
the  Central  Pacific  fell  in  debt  to  the  Contract  and  Finance  Company 
and  had  not  anything  to  pay  it  with  excepting  the  land.  On  those  lands 
(the  lands  which  the  Government  had  given  to  build  the  road)  the 
Central  Pacific  issued  a  mortgage  and  gave  the  Contract  and  Finance 
Company  the  mortgage  to  pay  that  company  what  it  lacked  in  gold. 
That  seems  to  me  very  simple. 

Senator  MORGAN.  Were  those  lands  not  under  a  lien  in  favor  of  the 
United  States? 

Mr.  HUNTINGTON.  I  should  say  no;  and  I  believe  it  has  been  decided 
that  we  had  a  right  to  mortgage  the  lands. 

Senator  MORGAN.  And  that  does  not  interrupt  the  lien  of  the  United 
States? 

Mr.  HUNTINGTON.  No;  if  the  United  States  wants  to  pay  off  the 
mortgage  on  the  lands,  I  should  like  to  have  it  do  so. 

Senator  MORGAN.  You  sold  the  lands  and  carried  the  money  to  the 
Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Then  you  got  $8,000,000,  the  proceeds  of  tfoe  sales 
of  lauds.  You  got  all  the  Government  bonds  and  all  the  first-mortgage 
bonds;  and  then  you  got  all  of  the  stock  of  the  Central  Pacific  Com- 
pany, which  was  issued  in  payment  for  this  contract  to  build  the  road  ? 

Mr.  HUNTINGTON.  We  did  not  get  it  all;  we  got  whatever  we  agreed 
to  be  paid.  The  whole  stock  of  the  Central  Pacific  is  $100,000,000. 

Senator  FRYE.  And  the  whole,  together,  did  not  build  the  road? 

Mr.  HUNTINGTON.  No ;  when  we  got  through  the  Contract  and  Finance 


GOVERNMENT   DEBT   OF   THE    PACIFIC   RAILROADS.  347 

Company  could  not  pay  its  debts  out  of  the  assets  which  it  had ;  and 
it  was  only  by  carrying  along  the  debt  from  year  to  year,  till  the  stock 
appreciated,  that  we  could  pay  the  debt.  As  soon  as  people  would 
buy  the  stock  and  I  could  see  my  way  clear  to  paying  the  debts  of  the 
Contract  and  Finance  Company,  I  commenced  selling  the  shares,  and 
they  went  up,  until  at  the  end  we  had  something  to  the  good. 

The  CHAIRMAN.  In  other  words,  the  Contract  and  Finance  Company 
held  those  assets  until  they  advanced  sufficiently  in  value  to  enable 
the  company  to  pay  its  debts,  which  the  Contract  and  Finance  Com- 
pany had  incurred  in  carrying  out  this  contract  to  build  the  road! 

Mr.  HUNTINGTON.  Yes;  exactly. 

Senator  MORGAN.  State  what  it  cost  the  Contract  and  Finance  Com- 
pany to  build  the  road. 

Mr.  HUNTINGTON.  I  have  stated  to  the  Senator  a  number  of  times 
that  I  do  not  know;  but  I  do  not  believe  that  the  road  could  be  built 
for  less  than  $90,000,000  in  money. 

Senator  MORGAN.  And  you  got  $116,000,000  in  stock  and  bonds, 
besides  $8,000,000  for  land,  making  $124,000,000? 

Mr.  HUNTINGTON.  Well,  that  is  easy  enough  said.  We  bought  a 
large  block  of  this  stock  at  12£  cents,  and  I  got  the  man  who  sold  it 
to  take  it  back  two  years  afterwards  s+  *!?.e  same  price.  These  are 
facts. 

Senator  MORGAN.  That  does  not  prove  anything  about  the  market 
price  of  the  stock. 

Mr.  HUNTINGTON.  Do  you  suppose  that  he  would  have  sold  his  stock 
below  the  market  price?  I  do  not  believe  that  we  could  have  sold  that 
stock  at  that  time  on  the  market  at  10  per  cent,  although  I  believed 
then  that  it  would  be  valuable  at  some  time.  I  really  want  to  have  you 
know  everything  about  it. 

The  CHAIRMAN.  A  resolution  has  been  offered  in  the  Senate  by  Sen- 
ator Allen,  and  referred  to  this  committee,  which  requires  the  committee 
to  procure  from  the  Central  Pacific  Company  and  from  the  Union  Pacific 
Company  information  as  to  the  cost  of  the  construction  of  these  roads, 
and  then  we  are  to  ascertain  the  amount  of  Government  aid  furnished 
to  the  companies. 

Mr.  HUNTINGTON.  I  can  give  that  right  here,  under  oath. 

The  CHAIRMAN.  I  want  it  in  the  form  of  communications,  to  be  fur- 
nished by  the  company. 

Mr.  HUNTINGTON.  The  Contract  and  Finance  Company  got 
$60,000,000  of  Central  Pacific  stock  and  $27,000,000  of  Government 
bonds  and  the  laud  grant,  which  was  worth  $8,000,000,  and  we  got 
nothing  more. 

Senator  MORGAN.  Yes;  you  got  $27,000,000  of  first  mortgage  bonds. 

Mr.  HUNTINGTON.  Those  are  the  bonds  of  the  company.  We  got 
$240,000  in  gold  from  the  city  of  San  Francisco.  The  building  of  that 
road  was  the  cleanest  piece  of  work  ever  done  in  the  United  States. 

Senator  MORGAN.  Mr.  Brannan,  in  his  bill  in  equity,  speaks  about 
the  bonds  of  the  United  States  Government,  $27,000,000;  the  first- 
mortgage  bonds  of  the  Central  Pacific,  $27,000,000;  and  of  the  second- 
mortgage  bonds  delivered  to  Stanford,  Charles  and  E.  B.  Crocker,  Hunt- 
ington,  Hopkins,  A.  P.  Stanford,  and  Marsh  and  Miller,  $15,601,000. 
Did  that  amount  go  the  construction  of  the  road? 

Mr.  HUNTINGTON.  I  do  not  know  anything  about  the  second  mort- 
gage. 

Senator  MORGAN.  Tnat  is  what  is  stated  here  in  this  bill  in  equity. 

Mr.  PAYSON  (of  counsel  for  the  Central  Pacific).  That  undoubtedly 
refers  to  a  mortgage  on  the  unaided  portion  of  the  line* 


348          GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS, 

Senator  MORGAN.  It  went  to  the  construction  of  the  road.  Was  that 
amount  turned  over  to  the  Contract  and  Finance  Company? 

Mr.  HUNTINGTON.  I  do  not  know.    I  do  not  think  it  was. 

Senator  FRYE.  That  had  nothing  to  do  with  the  aided  portion  of  the 
line  at  all. 

Senator  MORGAN.  They  speak  in  this  bill  in  equity  of  second-mort- 
gage bonds,  "issued  and  sold  as  above  charged,"  $11,787,000. 

Mr.  HUNTINGTON.  I  do  not  know  anything  about  that.  What  date 
was  that? 

Senator  FRYE.  What  are  you  reading  from,  Senator  Morgan? 

Senator  MORGAN.  From  a  bill  in  equity  here,  I  want  to  know  the 
height  and  depth  and  breadth  and  width  of  Sam  Braunan's  offense. 
One  of  the  charges  he  brings  is — 

That  from  and  after  the  organization  of  said  Contract  and  Finance  Company  all 
the  contracts  made  and  entered  into  in  the  name  of  the  said  Central  Pacific  for 
materials  to  be  furnished  for,  and  work  to  be  done  in,  the  construction,  furnishing, 
and  equipment  of  said  railroad  and  telegraph  line,  were  by  said  Leland  Stanford, 
Hopkins,  Huntington,  C.  &  E.  B.  Crocker,  and  their  confederates,  composing  a  major- 
ity of  the  directors  of  said  Central  Pacific,  voted  to  be  let,  and  in  fact  were  let  and 
entered  into  by  said  Central  Pacific  of  the  one  part  and  the  said  Contract  and  Finance 
Company  of  the  other  part,,  without  advertising  to  let  the  same  to  the  lowest  bidders 
or  bidder,  and  without  in  any  manner  inviting  competition  therefor. 

That  is  one  of  the  charges  he  makes.    Is  that  true? 

Mr.  HUNTINGTON.  I  do  not  know.  I  read  that  complaint  originally. 
It  was  got  up  to  see  how  much  money  they  could  get  out  of  us.  I 
believe  they  got  something  out  of  Stanford.  It  was  a  blackmail  concern 
originally;  and  it  has  been  hashed  and  rehashed  and  published  by  a 
little  clique  in  San  Francisco  from  that  time.  It  has  been  their  bread- 
winner. But  pince  I  have  been  in  control  it  has  not  been  a  bread- 
winner to  anybody. 

Senator  MORGAN.  Was  Sam  Brannan  a  stockholder  in  the  Central 
Pacific? 

Mr.  HUNTINGTON.  I  do  not  knowj  he  might  have  been  and  I  might 
not  have  known  it. 

Senator  MORGAN.  He  brought  this  suit  as  a  stockholder? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  He  had  a  right  to  call  you  to  account  in  the  courts. 

Mr.  HUNTINGTON.  I  do  not  say  that  he  had  not. 

Senator  MORGAN.  Then  why  do  you  say  that  it  was  blackmail? 

Mr.  HUNTINGTON.  Because  everything  we  did  was  right  and  proper. 
He  had  a  little  interest,  I  presume,  in  the  company  and  thought  he 
would  get  money  out  of  it.  They  did  the  same  in  New  York. 

Senator  MORGAN.  You  say  here,  in  this  memorandum,  referring  to 
that  suit,  "if  it  had  been  under  my  supervision  I  would  have  fought 
them  in  the  same  way  and  with  the  same  result." 

Mr.  HUNTINGTON.  Yes,  because  I  would  have  shown  that  everything 
which  we  had  done  was  all  right.  But  for  some  reason  or  other  they 
did  not  want  to  get  into  the  courts.  I  do  not  know  why. 

Senator  MORGAN.  As  vice-president  of  the  company,  was  not  that 
under  your  supervision  as  much  as  under  any  other  body's? 

Mr.  HUNTINGTON.  Stanford  was  president  and  he  was  in  California, 
while  I  was  in  New  York.  I  had  nothing  to  do  with  it. 

Senator  MORGAN.  You  state  here  in  this  memoranda  which  you  have 
submitted : 

I  have  already  stated  what  an  absolutely  wild  and  reckless  estimate  of  the  cost  of 
the  road  is  contained  in  the  report  of  the  commission  in  pages  74  and  75,  where  it  is 
stated  as  amounting  to  $36,000,000.  They  are  mistaken  in  that.  They  do  not  know 


GOVERNMENT    DEBT    OF   THE    PACIFIC    RAILROADS.  349 

and  could  not  know  anything  about  the  cost  of  constructing  the  road,  while  I  knew 
all  about  it. 

You  do  not  know  now? 

Mr.  HUNTINGDON.  I  do.  After  we  got  the  profiles  we  said  that  we 
could  build  the  road  for  about  so  much  in  assets,  and  we  expected  to 
make  some  money. 

Senator  MORGAN.  How  much  did  it  cost? 

Mr.  HUNTINGTON.  Sixty  million  dollars  in  shares  of  stock  at  its  face 
value,  $56,000,000  in  bonds,  and  the  land  grant. 

Senator  MORGAN.  And  you  spent  it  all  in  building  the  road? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Did  you  spend  any  more? 

Mr.  HUNTINGTON.  When  we  put  in  money  we  took  it  out  again. 

Senator  MORGAN.  How  much  in  money  had  it  cost  you  on  the  day 
you  finished  the  road  and  drove  the  last  spike  in  it?  How  much  had  it 
cost  you  to  build  and  equip  the  road  ? 

Mr.  HUNTINGTON.  It  had  cost  the  proceeds  of  $27,000,000  of  Gov- 
ernment bonds. 

Senator  MORGAN.  That  is  not  what  I  want.  I  want  to  know  what 
it  had  cost  you  in  money. 

Mr.  HUNTINGTON.  That  is  the  only  way  that  I  can  get  at  it. 

Senator  MORGAN.  You  kept  your  books,  and  you  know  how  much  it 
cost  you.  How  much  money  did  you  spend  in  building  this  road? 

Mr.  HUNTINGTON.  All  the  money  we  got. 

Senator  MORGAN.  You  did  not  pay  for  the  work  in  stock  or  bonds 
or  lands.  You  paid  for  it  in  money.  How  much  money  did  you  spend? 

Mr.  HUNTINGTON.  All  the  money  which  we  got,  and  then  we  could 
not  pay  for  it  when  we  got  through. 

Senator  MORGAN.  You  must  not  think,  Mr.  Huntingtou,  that  I  am  a 
child,  and  that  you  can  evade  answering  my  questions. 

Mr.  HUNTINGTON.  I  do  not  want  to  evade  answering  them. 

Senator  MORGAN.  I  will  state  the  question  again.  You  did  not  pay 
for  the  work  in  stock;  you  did  not  pay  for  it  in  bonds;  you  did  not  pay 
for  it  in  lands;  you  paid  for  it  in  money. 

Mr.  HUNTINGTON.  Yes;  we  paid  for  it  in  money. 

Senator  MORGAN.  How  much  money  was  due  for  the  building  of  that 
road  at  the  time  you  finished  it? 

Mr.  HUNTINGTON.  I  can  not  say.  I  should  say  somewhere  in  the 
neighborhood  of  $10,000,000  or  $12,000,000. 

Senator  MORGAN.  1  do  not  mean  the  balance  which  was  due.  I  am 
talking  about  what  the  road  cost  in  money. 

Senator  FRYE.  I  think  Mr.  Huntington  answered  the  question  just 
as  it  was  asked. 

Senator  MORGAN.  Your  answer  as  to  ten  or  twelve  millions  means 
how  much  money  you  had  lost? 

Mr.  HUNTINGTON.  No ;  it  means  how  much  we  owed  when  the  road 
was  finished. 

Senator  MORGAN.  Here  is  a  railroad  company  for  which  you  build  a 
road.  How  much  did,  you  charge  that  railroad  company  in  money  for 
that  road  ?  How  much  in  money  did  your  books  show  that  you  had 
expended  in  building  that  road? 

Mr.  HUNTINGTON.  I  can  not  say.  I  suppose  the  books  of  the  Con- 
tract and  Finance  Company  showed  what  that  company  had  paid  out; 
and  Mr.  Crocker's  books  would  show  what  he  paid  out  on  his  contract; 
and  the  books  of  the  other  seven  contractors  would  show  what  they  paid 
out  on  this  31  miles  of  road.  But  I  never  saw  these  items. 


350  GOVERNMENT   DEBT   OF   THE   PACIFIC    RAILROADS. 

Senator  MORGAN.  I  am  talking  about  the  Contract  and  Finance 
Company. 

Mr.  HUNTINGTON.  I  never  saw  their  books. 

Senator  MORGAN.  Therefore  you  can  not  state  ? 

Mr.  HUNTINGTON.  No;  but  I  know  that  we  had  not  enough  to  pay 
our  debts  out  of  the  assets  which  were  left. 

Senator  MORGAN.  I  want  to  know  what  it  cost  the  Contract  and 
Finance  Company  to  build  the  road — whether  it  broke  you  or  whether 
it  made  you? 

Mr.  HUNTINGTON.  It  did  not  break  us,  and  it  did  not  make  us. 

Senator  MORGAN.  You  know  (if  you  know  anything  about  it)  and 
you  say  that  the  commission  did  not  know  what  they  were  talking 
about? 

Mr.  HUNTINGTON.  How  could  they? 

Senator  MORGAN.  They  could  know  after  hearing  your  testimony; 
although,  if  they  had  to  rely  on  such  statements  as  you  have  made 
here,  they  could  not  find  out. 

Mr.  HUNTINGTON.  I  gave  them  all  that  I  knew.  I  was  in  New  York 
while  the  Contract  and  Finance  Company  was  building  the  road. 

Senator  MORGAN.  I  am  willing  to  admit,  Mi-.  Huntingtou,  that  you 
have  successfully  evaded  the  question,  and  I  will  not  ask  you  anymore 
on  that  subject.  I  want  that  to  appear  on  the  record. 

Mr.  HUNTINGTON.  The  stenographer  will  also  put  down,  if  he  will, 
that  Mr.  Huutington  did  his  very  best  to  give  the  Senator  all  the 
knowledge  which  he  had  on  the  subject. 

Senator  MORGAN.  That  is  all  right.  I  would  like  you  to  make  an 
explanation  here.  In  this  paper  which  you  have  submitted  to  the  com- 
mittee you  say : 

As  an  illustration  of  the  methods  adopted  by  the  Commission  in  ascertaining  the 
cost  of  work,  I  would  refer  to  the  report  at  the  foot  of  page  75,  where  they  substituted 
a  wholly  unfounded  assumption  of  their  own  for  the  testimony  of  Gen.  G.  M.  Dodge, 
a  well-known  and  experienced  engineer,  of  undoubted  ability  and  integrity,  as  to 
the  actual  cost  of  construction  of  the  47£  miles  of  the  road  from  Promontory  to 
Bonneville  Table.  General  Dodge  testified  that  the  cost  of  this  piece  of  road  was 
$87,000  cash  per  mile,  which  would  equal  $4,132,500,  notwithstanding  which  fact  the 
Commissioners,  for  their  own  purposes,  and  without  evidence,  see  fit  to  estimate  its 
cost  at  $3,000,000.  I  have  no  doubt  but  that  General  Dodge's  statement  was  right; 
and  it  should  be  understood  that  there  were  no  important  structures  on  the  47|  miles, 
and  that  no  rolling  stock  went  with  it. 

What  charge  do  you  bring  against  the  commissioners  there  when 
you  say  that  they  did  this  for  their  own  purposes? 

Mr.  HUNTINGTON.  I  do  not  know  their  purposes. 

Senator  MORGAN.  Do  you  mean  to  accuse  the  gentlemen  who  com- 
posed that  commission  of  having  personal  interests  to  subserve  in 
making  that  report? 

.  Mr.  HUNTINGTON.  There  are  many  things  in  it  which  would  seem  to 
show  that,  like  the  Sam  Brannau  complaint,  they  had  some  animus 
somewhere.  What  it  was  I  do  not  know.  I  certainly  know  that  Mr. 
Anderson  and  Mr.  Littler  are  very  nice  gentlemen. 

Senator  MORGAN.  You  mean  to  make  an  impeachment  of  the  integrity 
of  these  officers  ? 

Senator  FRYE.  Oh,  no,  Mr.  Morgan;  I  think  that  Mr.  Huutington 
did  nothing  of  the  kind. 

Senator  MORGAN.  I  do  not  care  to  know  what  you  think  of  it,  Mr. 
Frye. 

Mr.  HUNTINGTON.  i  think  a  good  deal  of  both  those  gentlemen ;  I 
know  Mr.  Anderson  very  well  and  I  know  Mr.  Littler  very  well,  and  I 
do  not  think  that  either  of  them  would  do  anything  wrong. 


GOVERNMENT   DEBT    OF   THE   PACIFIC    RAILROADS.  351 

Senator  FRYE.  I  do  not  wish  Senator  Morgan  to  say  that  he  does 
not  care  what  I  say  about  it. 

Senator  MORGAN.  In  regard  to  this  particular  question,  I  do  say  it. 

Senator  FRYE.  I  require  to  be  treated  with  politeness. 

Senator  MORGAN.  You  get  treated  with  all  the  politeness  you  deserve. 
At  the  same  time,  when  I  am  asking  a  witness  a  question,  and  he  does 
not  answer  it  as  it  should  be  answered,  you  have  110  right  to  interfere 
between  me  and  the  witness. 

Senator  FRYE.  I  do  not  think  it  legitimate  to  inquire  of  a  witness 
whether  he  impeaches  certain  officers.  To  ask  a  witness  to  testify, 
inferentially,  whether  or  not  he  is  impeaching  certain  officers  would  not 
be  tolerated  in  any  court. 

The  CHAIRMAN.  Every  Senator  here,  of  course,  is  on  an  equal  foot- 
ing, and  it  is  fair  to  presume  that  all  members  of  the  committee  will 
conduct  their  examinations  with  dignity  and  treat  their  colleagues  with 
proper  respect. 

Senator  MORGAN.  Does  the  chair  think  it  is  proper  for  Mr.  Frye  to 
break  into  a  question  which  the  witness  is  answering t 

The  CHAIRMAN.  The  chair  has  no  right  to  think  anything  about  it. 
The  chair  is  simply  making  a  remark. 

Senator  MORGAN.  If  the  Chair  has  no  right  to  think  anything  about 
it,  the  Chair  has  no  right  to  say  anything  about  it,  and  if  the  Chair  will 
permit  that  to  be  done,  I  shall  make  an  appeal  to  the  Senate. 

The  CHAIRMAN.  Senator  Frye  has  a  perfect  right,  as  your  equal  and 
mine,  to  speak  regarding  the  line  of  cross-examination. 

Senator  MORGAN.  He  has  a  perfect  right  to  do  that,  but  he  has  no 
right  to  interrupt  the  witness  between  a  question  and  answer. 

(To  Mr.  Huntington.)  You  say  in  this  memorandum: 

Notwithstanding  which  facts  the  Commission,  for  their  own  purpose  and  without 
evidence,  see  fit  to  estimate  the  cost  at  $3,000,000. 

Mr.  HUNTINGTON.  If  that  language  suggests  any  wrong  purpose  on 
the  part  of  the  commission  I  will  change  it.  I  do  not  mean  to  say 
that,  but  I  think  that  the  commissioners  had  a  lot  of  information  s-uch 
as  you  can  get  in  San  Francisco  to-day.  I  think  they  were  filled  with 
stuff  taken  from  the  Examiner's  story,  while  good  men  out  there  were 
attending  to  their  own  business.  That  is,  I  think,  where  the  Commis- 
sioners got  their  information. 

Senator  MORGAN.  The  commissioners  reported  to  the  Government 
all  these  facts  from  sworn  witnesses  before  them  as  sworn  commis- 
sioners. 

Mr.  HUNTINGTON.  I  think  that  Mr.  Anderson  and  Mr.  Littler  did  not 
intend  to  do  anything  wrong;  but  I  think  they  were  filled  up  with 
wrong  information  either  under  oath  or  otherwise. 

Senator  MORGAN.  What  grounds  have  you  for  thinking  so? 

Mr.  HUNTINGTON.  Their  views  about  the  cost  of  that  road  being 
$3,000,000 — they  could  not  know  anything  about  it.  General  Dodge 
says  it  cost  $87,000  a  mile.  He  was  the  engineer  and  knew  all  about 
it.  That  part  of  the  road  was  not  finished  when  we  bought  it,  and  we 
changed  the  line.  It  had  not  a  wheel  on  it  when  we  bought  it.  I  think 
that  we  put  into  the  road,  giving  it  its  proportion  of  rolling  stock  and 
completing  it,  $1,000,000  after  we  bought  it.  Now,  that  road  did  not 
cost  as  much  as  the  building  of  our  road  cost,  because  we  had  to  send 
our  material  around  Cape  Horn  at  an  enormous  cost  for  freight,  and  an 
enormous  rate  of  interest,  and  we  had  to  unload  it  at  San  Francisco  and 
take  it  to  Sacramento,  and  then  haul  it  back  nearly  all  the  way  across 


352  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

the  continent,  so  that  the  Central  Pacific  would  naturally  cost  50  per 
cent  more  than  the  Union  Pacific.  I  think  Senator  Morgan  will  say 
that. 

Senator  MORGAN.  Then  you  mean  to  say  that  the  commissioners  did 
this  for  their  own  purpose? 

Mr.  HUNTINGTON.  If  my  language  means  that,  I  will  change  it  so  far. 
I  thought  there  might  be  something  in  it,  but  I  do  not  know  what  it  is. 
Perhaps  it  may  have  been  Mr.  Pattison's  influence. 

Senator  MORGAN.  Had  not  Mr.  Pattison  as  much  right  to  his  judg- 
ment as  any  of  the  other  commissioners? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  What  you  are  inveighing  against  here  is  the  judg- 
ment, not  of  a  partisan,  but  of  the  other  commissioners'? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Have  you  any  reason  for  saying  that  Mr.  Pattison 
was  influenced  by  anything  improper? 

Mr.  HUNTINGTON.  If  you  will  excuse  me,  I  would  rather  not  talk 
about  Mr.  Pattison. 

Senator  MORGAN.  The  people  of  the  United  States  seem  to  have 
some  respect  for  him. 

Mr.  HUNTINGTON.  I  suppose  so. 

Senator  MORGAN.  You  say  here — 

It  would  be  useless  to  undertake  to  discuss  the  tables  which  were  stated  to  have 
been  prepared  by  the  accountant  of  the  commission  in  regard  to  the  cost  of  con- 
struction and  the  consideration  received  in  bonds  or  stock  or  cash  for  such  construc- 
tion. I  have  already  shown  by  my  statements  how  utterly  unfounded  are -the 
assumptions  of  that  report  in  regard  to  the  actual  cash  cost  of  the  construction  of 
the  various  properties. 

Have  you  done  that;  have  you  shown  the  actual  cash  cost  of  the 
construction  of  the  various  properties  ? 

Mr.  HUNTINGTON.  Yes;  we  knew  what  we  had  to  do  it  with  and  we 
knew  the  work  that  we  had  to  do,  and  we  knew  what  we  had  when  we 
got  through  the  work.  That  is  the  best  bookkeeping  in  the  world. 
I  did  not  follow  the  details  of  it. 

Senator  MORGAN.  Then  you  state,  with  reference  to  what  it  cost  you, 
and  not  what  it  cost  the  Central  Pacific? 

Mr.  HUNTINGTON.  To  what  it  cost  the  Contract  and  Finance  Com- 
pany; and  that  company  did  not  have  enough  when  the  work  was  com- 
pleted to  pay  its  debts. 

Senator  MORGAN.  And  you  naturally  identify  yourself  with  the 
Central  Pacific  and  with  the  Contract  and  Finance  Company  because 
you  were  part  of  both  ? 

Mr.  HUNTINGTON.  Yes;  and  that  was  the  only  way  to  build  the  road. 

Senator  MORGAN.  I  am  trying  to  find  out,  as  if  you  were  a  stranger 
to  the  Central  Pacific  Company,  how  much  the  building  of  the  road 
cost  the  Central  Pacific  Company  ? 

Mr.  HUNTINGTON.  It  cost  so  much  in  stock  and  so  much  in  bonds 
and  so  much  in  lands. 

Senator  MORGAN.  Do  you  mean  to  say  it  was  paid  for  in  those  spe- 
cific articles  and  not  in  money  at  all? 

Mr.  HUNTINGTON.  The  Central  Pacific  paid  part  in  money  and  part 
in  land  and  stock  of  the  Central  Pacific. 

Senator  MORGAN.  The  next  question  is  how  much  money  did  the 
Contract  and  Finance  Company  pay  out  to  complete  the  road  ? 

Mr.  HUNTINGTON.  We  paid  out  all  we  got. 

Senator  MORGAN.  Then  you  have  no  particular  reason  for  saying  how 
utterly  unfounded  i?  the  estimate  of  the  Commissioners  in  this  report^ 


GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  353 

Mr.  HUNTINGTON.  I  have,  because  I  say  we  paid  out  all  the  money 
that  we  got,  aiid  the  cost  was  very  much  more. 

Senator  MORGAN.  If  that  is  the  best  answer  that  you  can  make  I 
suppose  we  can  go  on.  The  integrity  of  this  Commission  can  not  be 
assailed  by  testimony  like  that. 

Mr.  HUNTINGTON.  I  think  it  is  the  best  way  in  the  world  of  arriving 
at  the  cost  of  anything. 

Senator  MORGAN.  You  say  here — 

As  to  the  charge  of  using  money  to  influence  legislation,  I  will  say  that  no  money 
was  ever  used  by  me  or  anybody  connected  with  our  companies  with  my  knowledge 
for  the  purpose  of  influencing  legislation,  except  that,  from  time  to  time,  different 
persons  have  been  employed  in  various  States  and  Territories  and  at  Washington  to 
see  that  the  facts  in  regard  to  pending  legislative  matters  were  thoroughly  and  fully 
understood  by  the  legislators  who  had  to  pass  upon  them. 

Do  you  mean  people  employed  in  Washington  as  your  lobby? 

Mr.  HUNTINGTON.  They  would  be  people  employed  to  do  certain 
things  for  which  they  received  pay. 

Senator  MORGAN.  What  certain  things? 

Mr.  HUNTINGTON.  What  is  stated  there— to  explain  things;  that  is 
done  everywhere. 

Senator  MORGAN.  I  do  not  want  to  try  to  prove  that  you  paid  money 
to  members  of  legislatures  or  to  members  of  the  House  or  Senate.  I 
do  not  think  that  lias  any  particular  bearing  on  this  particular  case  at 
this  particular  time. 

Mr.  HUNTINGTON.  Still  I  would  like  to  say  as  a  witness,  when  that 
question  comes  up,  that  1  never  did  pay  any  money  to  anybody  directly 
to  influence  his  vote.  Of  course  I  might  hire  somebody  to  go  and 
explain  a  bill  to  a  member  of  the  legislature  or  to  a  Member  of  Congress 
and  get  him  to  vote  for  it  by  giving  him  all  the  facts  in  the  case.  I 
understand  the  trouble  to  be  that  legislators  have  so  much  to  do  that 
they  can  not  examine  every  subject;  and  while  I  can  not  get  to  talk 
with  them,  almost  every  Member  has  somebody  in  his  district  who 
knows  him  and  who  can  sit  down  beside  him  and  talk  the  matter  over 
with  him.  I  can  not  do  so  if  I  would,  and  I  have  to  get  it  done  by  others. 
I  see  that  the  great  London  and  Northwestern  Railway  spent  £500,000 
to  get  their  charter  through  Parliament,  and  nobody  supposed  that 
they  bought  a  vote  with  it. 

Senator  MORGAN.  If  they  did  not  buy  votes  they  violated  the  English 
custom.  We  have  not  yet  got  to  that  as  a  regular  business. 

Mr.  HUNTINGTON.  I  supposed  that  it  was  paid  to  attorneys. 

Senator  MORGAN.  This  report  of  the  commission  states  that  you  had 
paid  out  a  very  large  sum  of  money  in  this  way. 

Mr.  HUNTINGTON.  They  state  it  at  over  $2,000,000.  I  told  them  that 
it  must  be  more  than  that. 

Senator  MORGAN.  You  told  them  so  in  your  deposition? 

Mr.  HUNTINGTON.  I  think  I  did.  One  railroad  man  told  me  not  long- 
ago  that  in  Albany  he  always  calculated  to  spend  $250,000  a  year  for 
attorneys  to  go  there  and  explain  matters. 

Senator  MORGAN.  Did  that  $2,000,000  which  you  spent  come  out  of 
your  private  pocket? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  Where  did  it  come  from? 

Mr.  HUNTINGTON.  From  the  Contract  and  Finance  Company,  I 
suppose. 

Senator  MORGAN.  Did  you  keep  an  account  of  it? 

Mr.  HUNTINGTON.  Every  month  I  sent  my  accounts  to  California 
and  had  a  settlement. 
*B 23 


354  GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS. 

Senator  MORGAN.  Did  you  take  receipts  for  the  money  you  paid  out? 

Mr.  HUNTINGTON.  Not  generally.  Mr.  Faneher  was  there,  and  Mr. 
Searle  was  there,  and  other  men.  I  never  took  receipts  when  I  found 
men  whom  I  could  trust. 

Senator  MORGAN.  You  trust  them  and  say  nothing  about  it? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  That  is  one  of  the  faiths  that  remove  mountains. 

Mr.  HUNTINGTON.  I  suppose  so. 

Senator  MORGAN.  You  are  not  doing  that  something  now,  are  you — 
paying  lobbyists  to  help  us? 

Mr.  HUNTINGTON.  No;  I  am  doing  it  very  largely  myself— land  Mr. 
Boyd  and  Mr.  Payson,  our  regular  attorney. 

Senator  MORGAN.  You  quit  the  practice  then  that  you  have  been 
speaking  of? 

Mr.  HUNTINGTON.  Well,  yes;  I  think  so. 

Senator  MORGAN.  You  do  not  find  it  necessary  now  in  order  to  get 
a  bill  through  to  pay  out  $2,000,000? 

Mr.  HUNTINGTON.  That  amount  was  scattered  all  over  the  United 
States,  and  over  twenty-five  or  twenty-six  years. 

Senator  MORGAN.  It  was  all  the  better  for  being  scattered.  You  are 
not  doing  that  now? 

Mr.  HUNTINGTON.  No;  there  may  be  some  little  expenses  of  that 
kind;  probably  there  are.  I  send  my  accounts  to  California. 

Senator  MORGAN.  You  say  there  are  probably  some  little  expenses 
of  that  kind.  What  are  they? 

Mr.  HUNTINGTON.  I  can  not  say;  they  are  all  proper  and  legal. 

Senator  MORGAN.  I  suppose  the  propriety  of  them  depends  entirely 
upon  a  man's  recognition  of  what  is  proper  and  improper  ? 

Mr.  HUNTINGTON.  Yes. 

Senator  MORGAN.  Every  man  judges  that  for  himself? 

Mr.  HUNTINGTON.  Anybody  brought  up  in  Connecticut,  as  I  was, 
would  get  the  right  start. 

Senator  MORGAN.  When  he  had  lived  to  be  a  pretty  old  man  he 
might  be  out  of  the  way  ? 

Mr.  HUNTINGTON.  I  do  not  know  about  that.  When  I  get  there,  I 
will  judge  better. 

Senator  MORGAN.  Quite  a  number  of  letters  were  produced  in  evi- 
dence in  a  suit  between  you  and  Mrs.  Colton  ? 

Mr.  HUNTINGTON.  Yes ;  four  or  five  hundred. 

Senator  MORGAN.  Did  you  read  them  ? 

Mr.  HUNTINGTON.  I  read  some  letters. 

Senator  MORGAN.  Did  you  read  those  letters? 

Mr.  HUNTINGTON.  I  read  those  that  I  wrote. 

Senator  MORGAN.  Did  you  read  all  that  were  attributed  to  you  in 
that  contest? 

Mr.  HUNTINGTON.  I  did  not.  I  looked  over  them,  I  presume.  The 
thing  was  published,  but  I  did  not  read  them. 

Senator  MORGAN.  Have  you  seen  any  of  them  ? 

Mr.  HUNTINGTON.  The  fact  is  that  I  have  never  read  them.  They 
are  published  once  in  a  while. 

Senator  MORGAN.  When  you  did  read  them,  did  you  recognize  them  ? 

Mr.  HUNTINGTON.  Some  of  them. 

Senator  MORGAN.  You  are  not  prepared  to  deny  that  they  were  all 
true? 

Mr.  HUNTINGTON.  No  j  I  am  not  prepared  to  deny  that  they  were 
all  true. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  355 

Senator  MORGAN.  Have  you  ever  seen  those  letters  since  you  wrote 
them? 

Mr.  HUNTINGTON.  No  further  than  that  somebody  brought  me  a 
paper  in  which  they  were  printed. 

Senator  MORGAN.  I  mean  the  original  letters? 

Mr.  HUNTINGTON.  No;  I  have  not. 

Senator  MORGAN.  Has  any  agent  of  yours  ever  seen  them? 

Mr.  HUNTINGTON.  No;  I  think  not.  When  I  was  in  California  four 
different  parties  came  to  sell  them  to  me  after  they  were  stolen  out  of 
my  office,  or  perhaps  I  should  say  taken  out.  I  told  the  parties  to  sell 
them  to  some  newspaper.  I  said  that  those  I  had  written  I  did  not 
want  to  read  because  I  knew  what  was  in  them,  and  that  those  I  didn't 
write  I  did  not  want  to  read,  either. 

Senator  MORGAN.  Here  is  a  certified  statement  of  your  real  estate 
and  property  subject  to  taxation  at  the  time  you  began  business  in 
Sacramento,  1861,  1862,  1863,  and  1864  [handing  the  paper  to  witness]. 

Mr.  HUNTINGTON  (after  looking  at  the  paper).  I  do  not  remember 
anything  about  it.  It  may  be  all  right. 

Senator  FRYE  (to  Senator  Morgan).  What  is  it;  an  assessment  list? 

Senator  MORGAN.  An  assessment  list  of  Mr.  Huntington's  property 
in  Sacramento. 

Mr.  HUNTINGTON.  I  do  not  remember  much  about  it. 

Senator  FRYE  (to  Senator  Morgan).  Does  that  paper  purport  to  be  a 
certified  copy  ? 

Senator  MORGAN.  Yes,  sir;  a  certified  copy  under  seal. 

Mr.  HUNTINGTON.  I  do  not  remember  anything  about  it.  I  was  in 
New  York  mostly  those  years,  excepting  that  my  money  was  there 
largely;  I  do  not  know  anything  about  this  statement. 

Senator  MORGAN.  Did  you  have  any  real  estate  in  New  York? 

Mr.  HUNTINGTON.  No;  I  do  not  think  I  did. 

Senator  MORGAN.  How  much  money  did  you  keep  on  hand  there  on 
an  average? 

Mr.  HUNTINGTON.  I  do  not  know;  I  kept  some  money. 

Senator  MORGAN.  How  much? 

Mr.  HUNTINGTON.  I  do  not  remember  how  much.  I  always  had 
enough  to  pay  my  debts. 

Senator  MORGAN.  You  did  not  owe  any  debts,  did  you? 

Mr.  HUNTINGTON.  Yes;  I  owed  a  great  many  debts. 

Senator  MORGAN.  Large  ones? 

Mr.  HUNTINGTON.  Yes;  I  have  been  owing  money  in  New  York 
pretty  much  all  the  time  since  I  went  there. 

Senator  MORGAN.  I  suppose  when  you  say  you  had  enough  to  pay 
your  debts  that  you  do  not  mean  to  say  that  you  had  any  great  surplus 
after  paying  your  debts? 

Mr.  HUNTINGTON.  No;  I  had  something.  I  was  doing  a  pretty  large 
business  those  years. 

Senator  MORGAN.  Did  you  have  any  assessment  made  on  your  money 
in  New  York? 

Mr.  HUNTINGTON.  I  do  not  think  there  was. 

Senator  MORGAN.  In  accounting  for  your  assets  in  that  examination 
you  have  not  made  any  reference  to  the  money  you  had  in  New  York. 
I  would  like  to  know  exactly  how  much  you  had  and  what  money  you 
refer  to  as  constituting  part  of  your  estate  in  New  York. 

Mr.  HUNTINGTON.  I  do  not  know  how  much  I  did  have.  I  was  living 
there  then.  If  I  knew  how  much,  I  would  tell  you,  and  be  very  glad  to 
do  so. 

Senator  MORGAN.  Do  you  know  anything  about  the  contract  which 


356  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

was  signed  or  required  to  be  signed  by  the  merchants  and  shippers  of 
San  Francisco,  that  was  called  the  "pink  contract?" 

Mr.  HUNTINGTON.  I  do  not  think  I  ever  heard  of  it  before. 

Senator  MORGAN.  It  is  printed  in  an  appendix  of  a  report  to  the 
senate  and  assembly  of  California  in  1883,  page  133,  volume  3.  Do  you 
know  anything  about  it? 

Mr.  HUNTINGTON.  No;  I  never  heard  of  it;  or,  if  I  did,  it  has  passed 
entirely  out  of  my  mind. 

Senator  MORGAN.  Have  you  any  recollection  of  any  contract  which 
provided  for  an  examination  of  shippers'  books  by  the  company  if  it 
is  suspected  that  the  shipper  is  not  acting  in  good  faith  in  sending  all 
of  his  goods  by  the  company  lines.  Has  there  been  any  contract  of 
that  sort? 

Mr.  HUNTINGTON.  No;  I  do  not  think  I  recollect  it.  I  am  quite  sure 
I  never  heard  of  it,  and  still  I  may  have. 

Senator  MORGAN.  And  also  of  breaking  up  packages  en  route  if  the 
company  suspected  that  they  contained  anything  not  in  the  bills  of 
lading?  Do  you  recollect  any  contract  which  contained  that? 

Mr.  HUNTINGTON.  I  do  not. 

Senator  MORGAN.  Do  you  not  know  that  your  company  did  exact  a 
contract  of  that  kind  commonly  called  the  "pink  contract"  from  mer- 
chants and  others  in  relation  to  shipments  of  freight  on  your  lines? 

Mr.  HUNTINGTON.  No. 

Senator  MORGAN.  And  that  if  they  did  not  sign  that  contract  they 
would  not  be  entitled  to  equal  accommodation  with  other  people? 

Mr.  HUNTINGTON.  No.  I  may  say,  however,  that  that  might  be  a 
very  proper  thing  to  do. 

Senator  MORGAN.  If  they  did  do  it,  would  it  be  all  right? 

Mr.  HUNTINGTON.  I  should  think  it  a  very  proper  thing.  Goods  are 
shipped  according  to  their  value.  In  one  instance,  a  case  of  such 
weights,  paying  a  half  a  cent  a  pound,  was  shipped  from  San  Francisco, 
and  it  contained  a  case  of  cutlery  which  should  have  been  shipped  at  3 
cents  a  pound.  In  another  instance,  the  ship  Eldorado  went  on  the 
rocks,  and  we  found  a  case  of  kid  gloves  which  was  shipped  as  burlaps. 
The  case  of  kid  gloves  would  be  worth  $500  a  case,  while  the  burlaps 
would  be  worth  only  $50. 

Senator  MORGAN.  Were  rebates  of  freight  allowed  to  merchants  who 
signed  the  "  Pink  contract?" 

Mr.  HUNTINGTON.  Not  that  I  know  of.  If  a  man  sent  1,000  kegs  of 
nails  he  got  a  little  better  price  than  if  he  only  sent  1 ;  and  if  a  mer- 
chant gave  all  his  business  to  the  company  he  was  entitled  to  a  little 
rebate.  I  think  he  was  entitled  to  it.  If  a  man  wants  to  buy  from  a 
merchant  a  bale  of  sheeting  it  would  be  one  price,  but  if  he  took  20 
bales  it  would  be  another  price. 

Senator  MORGAN.  Do  you  know  that  these  reductions  and  abate- 
ments amounted  to  the  sum  of  $1,022,000  in  18641 

Mr.  HUNTINGTON.  I  do  not. 

Senator  MORGAN.  You  know  nothing  about  it? 

Mr.  HUNTINGTON.  I  do  not. 

Senator  MORGAN.  Do  not  your  books  show  that  rebates  were  made? 

Mr.  HUNTINGTON.  They  might.  I  am  not  a  bookkeeper.  I  keep 
away  from  books  as  far  as  I  can. 

Senator  MORGAN.  You  would  be  apt  to  know,  as  president  of  the 
company,  whether  in  a  single  year  (1864)  $1,060,000  had  been  allowed 
to  customers  for  rebates  ? 

Mr.  HUNTINGTON.  I  would  not  suppose  that  any  such  amount,  if  any, 
was  allowed.  If  there  was,  the  matter  is  all  settled  from  month  to 


GOVERNMENT   DEBT   OF   THE   PACIFIC   RAILROADS.  357 

month  among  the  traffic  men  and  would  not  naturally  come  to  me. 
That  is  one  of  the  disadvantages  of  having  so  many  roads.  I  have 
often  said  that  if  all  the  roads  in  the  United  States  could  be  owned  by 
one  company  rates  could  be  put  down  5  per  cent  and  more  money  made 
than  is  made  now.  I  see  that  one  company  has  had  $7,000,000  of 
unpaid  vouchers  for  rebates  of  that  kind. 

Senator  MORGAN.  In  1884,  or  about  that  time,  was  there  not  some 
arrangement  with  the  merchants  of  San  Francisco  that,  in  order  to  get 
rebates,  they  should  send  all  their  shipments  by  your  line? 

Mr.  HUNTINGTON.  I  think  that  there  was  such  an  arrangement,  but 
I  do  not  know  anything  of  the  details  5  still,  I  have  heard  of  it  before, 
somewhere. 

Senator  MORGAN.  You  have  heard  that  the  merchants  of  San  Fran- 
cisco signed  a  contract  by  which  everything  should  be  shipped  over 
your  lines  in  consideration  of  these  rebates  ? 

Mr.  HUNTINGTON.  If  they  shipped  all  their  business  I  should  say 
they  would  be  entitled  to  a  little  rebate.  In  merchandizing,  where  a 
man  takes  1,000  kegs  of  nails,  he  gets  a  little  rebate;  and  I  should  think 
that  if  a  merchant  gave  all  his  business  to  a  railroad  company  it  could 
afford  to  give  him  a  little  rebate.  I  should  say  that  that  would  be 
business  anywhere  in  the  world. 

The  CHAIRMAN.  Is  there  any  law  in  California  preventing  that? 

Mr.  HUNTINGTON.  I  do  not  know.  I  think  not.  We  must  treat  all 
men  alike.  If  one  man  comes  with  1,000  kegs  of  nails  and  another 
man  comes  with  1,000  kegs,  they  must  have  the  same  rate  of  freight. 

Senator  MORGAN.  If  two  men  were  to  ship  1,000  kegs  of  nails  on 
your  road,  and  if  one  of  them  signed  this  "  Pink  contract"  and  the 
other  refused  to  sign  it,  would  you  have  the  right  to  give  a  better  rate 
to  the  man  who  signed  it? 

Mr.  HUNTINGTON.  The  question  was  about  getting  all  the  business. 
Of  course,  if  the  1,000  kegs  of  nails  were  all  they  sent,  I  should  think 
it  would  be  quite  wrong  to  give  one  a  better  rate  than  the  other. 

Senator  MORGAN.  I  understood  you  to  say  that  you  did  have  some 
recollection  of  it. 

Mr.  HUNTINGTON.  I  think  I  have. 

Senator  MORGAN.  You  are  not  aware  that  litigation  has  taken  place 
between  your  company  and  the  merchants  of  San  Francisco  about  this 
"Pink  contract?" 

Mr.  HUNTINGTON.  I  never  heard  of  it  before. 

Senator  MORGAN.  You  are  not  aware  that  the  litigation  has  got  into 
the  newspapers  of  the  State,  and  has  been  printed  there? 

Mr.  HUNTINGTON.  I  do  not  think  I  ever  heard  of  it.  If  I  did,  it  has 
gone  out  of  my  mind.  I  do  not  read  newspapers  very  much.  I  think 
that  half  a  column  a  week  would  cover  all  my  newspaper  reading. 

Senator  MORGAN.  As  far  as  I  am  concerned,  I  will  not  ask  Mr. 
Huntington  any  more  questions. 

Senator  FRYE.  This  examination  has  lasted  a  long  while  and  has 
gone  over  a  great  deal  of  ground.  I  suppose  that  the  witness  will  have 
the  right,  after  his  testimony  is  presented,  to  examine  it  and  to  make 
corrections  ? 

Senator  MORGAN.  I  shall  insist  on  their  being  made  in  the  presence 
of  the  committee. 

Mr.  HUNTINGTON.  Of  course,  I  do  not  pretend  to  carry  the  details 
of  business  in  my  mind,  and  I  am  asked  questions  very  frequently 
',  which  I  ought  to  know,  but  do  not  know.  I  have  endeavored  to  give 
Senator  Morgan  the  best  that  I  know. 

The  committee  adjourned  until  Friday,  March  13,  at  10.30  a.  m.)  , 


358 


GOVERNMENT    DTCHT    OF    THE    PACIFIC    RAILROADS. 


CT5NTT1AI,  PACIFIC  RAIUIOAD. 

The  following  communications  were  received  from  Mr.  C.  P.  Hunt- 
ing-ton and  were  made  part  of  his  testimony : 

23  BROAD  STREET,  NEW  YORK,  March  17, 1896. 
DEAR  SIR:  One  of  your  committee  requested  information  regarding 
the  amount  of  fruit  or  fruit  product  in  California.  I  telegraphed  to 
California  for  the  facts  and  send  you  herewith  the  figures  they  have 
sent  me.  I  have  no  doubt  they  are  correct.  I  believe  the  object  of  the 
member  who  asked  the  information  was  to  see  how  much  of  the  tonnage 
was  not  perishable,  so  that  it  could  have  the  world's  market  and  take 
any  route,  and  how  much  was  perishable  and  necessarily  had  to  take  a 
short  route  and  be  limited  in  the  time  it  could  be  kept  and  the  distance 
it  could  be  transported. 
Yours  truly, 

0.  P.  HUNTINGDON. 
Hon.  JOHN  H.  GEAR, 

Chairman  Committee  on  Pacific  Railroads, 

United  States  Senate,  Washington,  D.  0. 


Statement  of  tonnage  of  green  fruit  from  California  to  the  East. 


Year. 

Deciduous. 

Citrus. 

Total. 

1891    

Pounds. 
83  200  000 

Pounds. 
37  400  000 

Pounds. 
120  600  000 

1802 

97  GOO  000 

19  200  000 

116  800  000 

1«<J3  

149,  000,  000 

65,  600  000 

214,  600  000 

1804    

167  600  000 

43  200  000 

210  806  000 

1895      ....          .          

123  000  000 

99  000  000 

222  000  000 

Total 

620  400  000 

264  400  000 

884  800  000 

^H 

Statement  of  tonnage  of  dried  fruit  and  wines,  California  to  the  East. 
DRIED  FRUIT. 


Year. 

Raisins. 

Prunes. 

Grapes. 

Figs. 

Other. 

1 
Total. 

1891 

Pounds. 
37  f,oo  000 

Pounds. 
23  200  000 

Pounds. 
5  400  000 

Pounds. 
50  000 

Pounds. 
33  000  000 

Pounds. 
99  250  000 

1892 

43  800  000 

20  000  000 

5  200  000 

86  000 

28  600  000 

97  686  000 

1893    

67,  200,  000 

42,  000  000 

3  800  000 

500  000 

30  800  000 

144  300  000 

1894 

86  200  000 

40  400  000 

4  000  000 

800  000 

51  800  000 

183  200  000 

1895 

88  200  000 

61  600  000 

1  000  000 

1  400  000 

52  400  000 

204  600  000 

Total  

323,  000,  000 

187,  200,  000 

19,  400,  000 

2  836,  000 

196,  600,  000 

729,  036,  000 

WINES. 


Year. 

Rail  lines, 
Southern 
Pacific  Com- 
pany. 

Panama 
route. 

Cape  Horn 
route. 

1891  

Pounds. 
58  500,000 

Pounds. 

18,  800,  000 

Pounds. 
27,  800,  000 

1892      ..     .   . 

66,  000,  000 

16,  000,  000 

28,  600,  000 

181)3 

88  400  000 

8  400  000 

24,  000  000 

1804 

116  000  000 

8  800  000 

13  400  000 

1895  

112,  800,  000 

25,  200,  000 

7,  200,  000 

Total  

441,  700,  000 

77,  200,  000 

101,  000,  000 

NOTE.— Atchison,  Topeka  and  Santa  Fe  takings  unknown ;  probably  not  to  exceed  one-tenth  of  that 
•hown  above  as  moving  over  Southern  Pacific  Company's  rails. 


GOVERNMENT  DEBT  OF  THE  PACIFIC  RAILROADS.       359 

i 

23  BROAD  STREET,  NEW  YORK,  March  20, 1896. 

DEAR  SIR:  I  beg  to  send  you  herewith  statements  comparing  the 
passenger  and  freight  earnings  on  the  Southern  Pacific  Company's 
lines,  with  those  of  the  more  thickly  settled  States  of  the  East;  also  a 
statement  showing  comparative  earnings  on  the  Southern  Pacific  Com- 
pany's lines,  and  those  of  certain  groups  of  States ;  also  a  statement 
showing  the  passenger  rates  from  London  on  the  London  and  North- 
western Railway,  which,  I  think,  will  prove  interesting  and  instructive. 
Statement  No.  3  illustrates  the  density  of  travel  and  tonnage,  showing 
the  earnings  from  passengers  and  freight  per  mile  of  road,  but  a  more 
graphic  illustration  of  this  as  between  Eastern  and  Western  States  (Atlan- 
tic and  Pacific  coast  States)  is  shown  in  the  diagrams  of  density  of  pas- 
senger and  freight  traffic,  as  set  forth  in  the  report  of  the  Interstate 
Commerce  Commission  for  the  year  ending  June  30,  1894. 

As  you  will  see,  these  statements  make  a  very  favorable  showing  for 
the  Southern  Pacific  lines,  considering  the  price  of  fuel;  and  from  the 
last  statement  you  will  perceive  that  the  third-class  fares  on  the  Lon- 
don and  Northwestern  Railway  are  just  abput  the  same  as  the  regular 
(first  class)  fares  on  the  Southern  Pacific. 

Very  truly,  yours,  C.  P.  HUNTINGDON. 

Hon.  JOHN  H.  GEAR, 

Chairman  Committee  on  Pacific  Railroads, 

United  States  Senate,  Washington,  D.  0. 

P.  S. — It  includes  also  the  Central  Pacific. 


No.  1. — Memorandum  comparing  company's  earnings  per  ton  per  mile  on  Southern  Pacific 
Company's  lines  with  those  of  the  more  thickly  settled  States  in  the  East,  as  stated  in  the 
railroad  commissioners'  reports  of  said  States. 

Southern  Pacific  system:  Cents. 


Year  1894. 
Year  1805. 


Maine  (as  average  is  not  published,  the  principal  railroad  systems  are  quoted, 
year  1895) : 


Bangor  and  Aroostook, 

Boston  and  Maine 

Maine  Central . . 


Massachusetts  (Railroad  Commissioner's  Report  for  1894,  p.  58) 
Connecticut  (Railroad  Commissioner's  Report  for  1894,  p.  123).. 
Illinois  (Railroad  Commissioner's  Report  for  1894,  p,  103) 


.171 
.137 


.911 
.545 
.412 
.330 
.427 
.213 


No.  2.— Memorandum  comparing  company's  earnings  per  passenger  per  mile  on  Southern 
Pacific  Company's  lines  with  those  of  the  more  thickly  settled  States  in  the  East,  at 
stated  in  the  railroad  commissioners'  reports  of  said  States. 

Southern  Pacific  system:  Cents. 

Year  1894 1.916 

Year  1895 2.004 

Maine  (Railroad  Commissioner's  Report,  year  1895,  as  average  is  not  published, 
the  principal  railroad  systems  in  Maine  are  quoted) : 

Bangor  and  Aroostook 2.421 

Boston  and  Maine 1.  745 

Maine  Central 2.284 

Massachusetts  (Railroad  Commissioner's  Report  for  1894,  p.  56) 1.800 

Connecticut  (Railroad  Commissioner's  Report  for  1894,  p.  122) 1. 802 

Illinois  (Railroad  Commissioner's  Report  for  1894,  p,  102) t 2, 312 


360 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


No.  3. — Memorandum  comparing  certain  statistical  data  published  in  the  Annual  Report 
of  the  Interstate  Railroad  Commission  for  the  year  ending  June  30,  1894,  in  respect  to 
Group  No.  I,  constituting  the  New  England  States,  Group  No.  IX,  constituting  Louisiana, 
Texas,  and  part  of  New  Mexico,  and  Group  X,  constituting  part  of  New  Mexico  and  the 
States  of  California,  Nevada,  Oregon,  Washington,  Utah,  and  Idaho,  with  same  data 
for  Southern  Pacific  Company. 


PASSENGER. 

Southern 
Pacific 
Company. 

Group  I. 

Group  IX. 

Group  X. 

Earnings  per  passenger  per  mile  .  . 
Earnings  per  passenger  train  mile 

cents  .  . 
do... 

2.004 
1.18.291 
$1,  667.  02 

1.854 
1.25.697 
$5,  248.  58 

2.444 
1.  00.  670 
$1,  024.  37 

2.046 
1.  39.  400 
$1,  616.  33 

FREIGHT. 

Earnings  per  ton  mile  

cents., 
do 

1.137 
1  92  544 

1.243 
1  57  009 

1.209 
1  64  779 

1.343 
1  94  779 

Earnings  per  mile  of  road  

$4,  089.  02 

$5,  229.  02 

$2,  883.  93 

$2,  791.  85 

The  statistics  for  the  Southern  Pacific  Company  are  for  the  year  1895. 

London  and  Northwestern  Railway  Company,  passenger  rates  from  London. 


Station. 

From 
London. 

Kate. 

Rate  per  mile. 

First 
class. 

Second 
class. 

Third 
class. 

First 
class. 

Second 
class. 

Third 
class. 

Wit  ford  Junction  .  ......... 

Miles. 
17.50 
24 
52.  50 
99 
158 
200 
251.  25 
300 
344.  50 
400 
450 
504 

$0.60 
.64 
1.92 
3.66 
5.80 
6.96 
8.48 
10.08 
10.80 
13.80 
15.80 
17.28 

$0.42 
.48 
1.32 
2.80 
4.62 
5.22 
6.64 
7.86 
8.40 

$0.33 
.39 
1.05 
1.95 
3.16 
3.96 
5.00 
5.78 
5.04 
7.84 
8.74 
9.82 

Cents. 
3.42 
2.66 
3.65 
3.69 
3.67 
3.48 
3.37 
3.36 
3.13 
3.45 
3.51 
3.42 

Cents. 
2.40 
2.00 
2.  51 
2.  83 
2.92 
2.61 
2.64 
2.62 
2.43 

Cents. 
1.88 
1.62 
2.00 
1.97 
2.00 
1.98 
1.99 
1.92 
1.46 
1.96 
1.94 
1.94 

St  Albans                                                 .  .. 

Kenilworth 

Crewe  

Liverpool      

Kendal 

Kes  wick  

Green  ore       

Edinburgh                                           

Perth                                                                          .     . 

Oban 

WASHINGTON,  D.  C.,  March  13, 1896. 
The  committee  met  at  10.30  a.  m. 
Present,  Senators  Gear  (chairman),  Wolcott,  Frye,  Brice,and  Stewart. 

THE  UNION  PACIFIC  RAILWAY. 

EXAMINATION   OF  OLIVER   W.  MINK. 

OLIVER  W.  MINK,  sworn  and  examined : 

Senator  WOLCOTT.  Mr.  Mink,  you  are  one  of  the  receivers  of  the 
Union  Pacific  Railway  Company? 

Mr.  MINK.  I  am. 

Senator  WOLCOTT.  How  long  have  you  been  connected  with  the 
organization  of  the  Union  Pacific  Company  ? 

Mr.  MINK.  I  have  been  one  of  the  receivers  since  October,  1893. 
Prior  to  that  time  I  was  connected  with  the  Union  Pacific  Railway  Com- 
pany and  its  constituents  since  1872. 

Senator  WOLCOTT.  In  all,  your  knowledge  of  the  road  extends  back 
for  nearly  twenty-five  years  ? 

Mr.  MINK,  Certainly. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  3fil 

Senator  WOLCOTT.  As  a  receiver  what  is  your  particular  branch  of 
the  business  ? 

Mr.  MINK.  Personally,  I  have  had  charge  of  the  duty  of  looking  after 
the  accounts  and  finances. 

Senator  WOLCOTT.  That  had  been  your  duty  for  several  years"? 

Mr.  MINK.  Yes;  in  the  days  of  the  corporation. 

Senator  WOLCOTT.  You  have  been  stationed  usually  in  Boston? 

Mr.  MINK.  Yes;  during  the  days  of  the  corporation.  Since  the 
receivership  I  have  been  in  New  York. 

Senator  WOLCOTT.  Have  you  a  table  showing  the  earnings  of  the 
road  since  the  receivership1? 

Mr.  MINK.  I  have. 

Senator  WOLCOTT.  The  receivership  commenced  when  ? 

Mr.  MINK.  It  dates  from  October  13,  1803. 

Senator  WOLCOTT.  Have  you  before  you  a  statement  showing  the 
earnings  from  the  date  of  the  receivership  until  December  31,  1895? 

Mr.  MINK.  I  have. 

Senator  WOLCOTT.  That  covers  about  how  many  months? 

Mr.  MINK.  That  covers  twenty-six  and  one  half  months. 

Senator  WOLCOTT.  What  are  the  portions  of  the  Union  Pacific  system 
covered  by  that  statement? 

Mr.  MINK.  The  statement  that  I  have  here  covers  all  the  railroads 
and  other  parts  of  the  system  in  the  hands  of  the  receivers. 

Senator  WOLCOTT.  Describe  the  property. 

Mr.  MINK.  The  Union  Pacific  Eailway  embraces  substantially  1,822 
miles;  and  all  of  the  other  companies  go  to  make  up  what  is  generally 
known  as  the  Union  Pacific  system. 

Senator  WOLCOTT.  Give  the  names  of  those  constituent  lines. 

Mr.  MINK.  Boise  City  Eailway  and  Terminal  Company ;  Carbon  Cutoff' 
Railroad  Company;  Atchison,  Colorado  and  Pacific  Railroad  Company; 
Atchison,  Jewell  County  and  Western  Eailroad  Company;  Denver 
Leadville  and  Gunnison  Eailway  Company;  Echo  and  Park  City  Eail- 
way Company;  Junction  City  and  Fort  Kearney  Eailway  Company; 
Kansas  Central  Eailroad  Company;  Kearney  and  Black  Hills  Eailway 
Company;  Lararnie,  North  Park  and  Pacific  Eailroad  and  Telegraph 
Company;  Montana  Eailway  Company;  Omaha  and  Eepublican  Valley 
Eailway  Company;  Oregon  Short  Line  and  Utah  Northern  Eailway 
Company;  Oregon  Eailway  and  Navigation  Company;  Oregon  Eail- 
way Extensions  Company;  Washington  and  Idaho  Eailroad  Company; 
St.  Joseph  and  Grand  Island  Eailroad  Company;  Kansas  City  and 
Omaha  Eailroad  Company;  Salina  and  Southwestern  Eaiiway  Com 
pany;  Solomon  Eailroad  Company;  Union  Pacific,  Lincoln  and  Colo- 
rado Eailway  Company ;  Union  Pacific,  Brighton  and  Boulder  Branch ; 
Union  Pacific,  Denver  and  Gulf  Eailway  Company.  Besides  those 
railroad  companies  the  receivers  also  have  charge  of  the  following 
miscellaneous  companies:  Boulder  Valley  and  Central  City  Wagon 
Eoad  Company;  Boseman  Coal  Company;  Callaway  Improvement 
Company;  Green  Eiver  Waterworks  Company;  Loveland  Pass  Mining 
and  Eailroad  Tunnel  Company;  Morrison  Stone,  Lime,  and  Town  Com- 
pany; Eattle  Snake  Creek  Water  Company;  Union  Land  Company; 
Union  Pacific  Coal  Company,  and  Wood  Eiver  Improvement  Company. 

Senator  FRYE.  Have  you  charge  of  all  of  the  coal  mines  which  the 
Union  Pacific  Eailway  Company  owned  six  or  eight  years  ago? 

Mr.  MINK.  Yes,  sir;  they  are  all  owned  to-day  by* the  Union  Pacific 
Coal  Company. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

The  CHAIRMAN.  Are  they  in  your  hands  as  receivers? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  As  to  those  railroad  companies  that  you  have 
enumerated ;  some  of  them  have  since  passed  out  of  your  hands  as 
receivers,  have  they  not? 

Mr.  MINK.  Yes.  The  Denver,  Leadville  and  Gunnison  Kailway  prop- 
erty was  taken  out  of  our  hands  on  the  7th  of  August,  1894.  The  Union 
Pacific,  Denver  and  Gulf  Kailway  property  was  taken  out  of  our  hands 
on  the  18th  of  December,  1893,  and  the  Oregon  Kailway  and  Navigation 
Company  system  was  taken  out  of  our  hands  on  the  3d  of  July,  1894. 

Senator  WOLCOTT.  How  much  railway  mileage  have  you  still  left  as 
receiver  ? 

Mr.  MINK.  Something  over  5.000  miles. 

Senator  WOLCOTT.  Of  those  5,000  miles  how  many  miles  are  included 
in  what  is  called  the  Government  aided  road? 

Mr.  MINK.  Fourteen  hundred  and  thirty  miles,  owned  by  the  Union 
Pacific  Company,  and  100  miles,  owned  by  the  Central  Branch  of  the 
Union  Pacific  Kailway  Company. 

Senator  WOLCOTT.  That  1,400  miles  includes  the  Kansas  Pacific? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  In  this  table  of  earnings  which  you  present  do 
you  show  separately  the  earnings  of  the  Government-aided  portions  of 
the  line? 

Mr.  MINK.  I  do  not.    I  can  have  it  done  without  difficulty. 

Senator  WOLCOTT.  I  desire  that  you  shall  furnish  to  the  committee 
a  statement  showing  the  earnings  and  expenses  of  those  portions  of  the 
line  known  as  the  Government-aided  line,  so  far  as  practicable,  since 
the  receivership. 

Mr.  MINK.  I  will  do  so. 

Senator  WOLCOTT.  The  statement  that  you  have  here  shows,  in  addi- 
tion to  the  1,400  miles  of  Government-aided  line,  the  line  between  Den- 
ver and  Kansas  City,  and  the  line  between  Denver  and  Cheyenne? 

Mr.  MINK.  Yes ;  about  400  miles  in  addition. 

Senator  WOLCOTT.  So  that  the  whole  line  concerning  which  your 
statement  is  applicable  would  be,  roughly  speaking,  from  Kansas  City 
to  Denver,  from  Denver  to  Cheyenne,  and  from  Council  Bluffs  to  Ogden? 

Mr.  MINK.  Yes;  including  also  the  line  from  Leavenworth  to  Law- 
rence and  Kansas  City. 

Senator  WOLCOTT.  What  are  the  gross  earnings? 

Mr.  MINK.  The  gross  earnings  of  the  1,822  miles  of  the  Union  Pacific 
Kailway  Company  from  October  13,  1893,  to  December  31,  1895,  are 
$32,832,602. 

Senator  WOLCOTT.  A  period  of  how  many  months  ? 

Mr.  MINK.  A  period  of  twenty  six  and  one  half  months. 

Senator  WOLCOTT.  And  what  are  the  gross  expenses? 

Mr.  MINK.  The  operating  expenses  were  $21,179,233. 

Senator  WOLCOTT.  Will  you  file  a  copy  of  your  statement? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  Naturally,  you  deduct  your  taxes  and  the  United 
States  earnings  withheld? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  And  you  show  the  interest  paid  on  coupon  orders. 
What  is  the  amount  of  that  interest  paid? 

Mr.  MINK.  $3,509,205. 

Senator  WOLCOTT.  What  is  meant  by  the  phrase  li coupon  orders"? 

Mr.  MINK.  Orders  of  the  court  to  pay  coupons. 


GOVERNMENT    DEBT    OF    THE   PACIFIC   RAILROADS.  363 

Senator  WOLCOTT.  On  what  securities  have  those  payments  been 
made? 

Mr.  MINK.  On  the  Union  Pacific  main  line,  first  mortgage  6  per  cent 
bonds,  $1,634,070  ;  on  the  Union  Pacific  sinking  fund  eights,  $149,200 ; 
on  the  Omaha  Bridge  eights,  $22,600;  on  the  collateral  trust  sixes, 
$110,160;  on  the  Eastern  Division  bonds,  first  mortgage,  Kansas  Division 
and  Leaven  worth  Branch,  $07,200;  on  the  Middle  Division  sixes,  Kan- 
sas Division  and  Leaven  worth  Branch,  $121,800;  on  the  consolidated 
mortgage  sixes,  Kansas  Division  and  Leaven  worth  Branch,  $351,600; 
on  the  collateral  trust  five  per  cents,  $116,925;  on  the  Omaha  Bridge 
lives,  $52,800;  on  the  equipment  trust  fives,  $33,475;  on  the  collateral 
trust  notes,  $668,835;  and  on  the  Denver  Extension,  $176,610;  making 
a  total  of  $3,505,365. 

Senator  WOLCOTT.  Were  those  different  coupons  paid  on  the  appli- 
cation of  the  receivers  or  on  the  order  of  the  court,  of  its  own  motion1? 

Mr.  MINK.  Never  on  the  order  of  the  court  of  its  own  motion ;  almost 
always  on  the  application  of  the  receivers. 

Senator  WOLCOTT.  Who  directed  those  applications  ?  Was  it  the 
initial  action  of  the  receivers? 

Mr.  MINK.  Generally  the  initial  action  of  the  receivers  or  of  a  majority 
of  them. 

Senator  WOLCOTT.  How  often  have  the  five  receivers  met  as  a  united 
body  ? 

Mr.  MINK.  The  majority  of  the  receivers  reside  in  New  York.  Our 
meetings  are  not  daily,  but  quite  frequent.  Mr.  Clark  is  in  Omaha,  Mr. 
Doane  in  Chicago,  Mr.  Coudert  is  a  lawyer  in  New  York,  Mr.  Anderson 
resides  in  New  York,  and  I  am  in  New  York  constantly.  I  pretend  to 
live  in  Boston,  but  I  am  most  of  the  time  in  New  York. 

Senator  WOLCOTT.  Give  a  general  idea  of  how  often  the  receivers 
meet. 

Mr.  MINK.  1  should  say  they  meet  formally  perhaps  twice  a  week 

Senator  WOLCOTT.  And  informally  every  day,  I  suppose? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  If  two  of  you  met,  would  that  be  informally? 

Mr.  MINK.  Yes;  a  majority  of  the  receivers  would  constitute  a  formal 
meeting. 

Senator  WOLCOTT.  Then,  as  a  rule,  three  of  you  get  together  about 
twice  a  week? 

Mr.  MINK.  I  should  say  so. 

^Senator  WOLCOTT.  Then,  on  the  united  action  of  the  receivers  these 
applications  to  the  court  are  generally  made? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  The  first  mortgage  sixes  come  before  the  Govern- 
ment lien,  do  they  not? 

Mr.  MINK.  They  do. 

Senator  WOLCOTT.  These  payments  have  come  out  of  the  earnings 
of  the  1,822  miles  of  the  Union  Pacific  Railway? 

Mr.  MINK.  They  have. 

Senator  WOLCOTT.  What  is  the  sinking  fund  eights. 

Mr.  MINK.  The  sinking  fund  eights  are  practically  a  first  mortgage  on 
the  lands  granted  to  the  Union  Pacific  Railway  Company,  and  are  a  third 
mortgage  on  the  main  line  of  the  Union  Pacific. 

Senator  WOLCOTT.  What  lands  are  there  included  in  the  mortgage; 
is  it  a  large  acreage? 

Mr.  MINK.  A  considerable  acreage.  At  the  end  of  1894  there  were 
3,345,000  acres  left  unsold. 


364  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  WOLCOTT.  So  that  the  payments  of  coupons  on  these  sink- 
ing fund  eights  were  made  to  preserve  the  integrity  of  the  lands  which 
might  otherwise  be  lost? 

Mr.  MINK.  They  were.  I  think  that  might  be  called  the  controlling 
consideration  in  their  payment. 

Senator  WOLCOTT.  The  mortgage  was  a  first  mortgage  on  those 
lands  ? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  And  a  third  mortgage  on  the  main  line? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  But  their  principal  security  would  be  on  the 
acreage  ? 

Mr.  MINK.  I  presume  so.  There  is  considerable  doubt  about  these 
sinking  fund  eights,  some  claiming  that  they  are  also  secured  on  a  large 
part  of  the  equipment;  but  that  claim  is  not  fairly  defined. 

Senator  WOLCOTT.  I  am  trying  to  help  to  show  that  there  was  an 
excellent  reason  for  paying  this  back  due  interest,  in  that  you  would 
otherwise  have  lost  your  title  to  the  lands  on  which  these  sinking  fund 
eights  were  a  first  mortgage,  and  there  was  a  claim  upon  equipment, 
whether  clear  or  shadowy  it  makes  no  difference;  and  the  mortgage  also 
stands  as  a  third  mortgage  on  the  railroad. 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  The  Omaha  Bridge  eights  cover  the  structure 
between  Council  Bluff's  and  Omaha? 

Mr.  MINK.  Yes,  and  the  approaches  to  the  bridge. 

Senator  WOLCOTT.  What  do  the  collateral  trust  sixes  cover? 

Mr.  MINK.  They  are  simply  a  note  of  the  Union  Pacific  Eailroad 
Company,  secured  by  a  pledge  of  bonds. 

Senator  WOLCOTT.  What  bonds? 

Mr.  MINK.  There  are  behind  the  6  per  cents  $1,740,000  of  Colorado 
first  mortgage  sevens,  $1,981,000  of  Utah  and  Northern  first  mortgage 
sevens,  and  $863,000  of  Omaha  and  Republican  Valley  first  mortgage 
sevens. 

Senator  WOLCOTT.  The  loan  is  how  much? 

Mr.  MINK.  The  loan  was  on  the  30th  of  June,  1894,  $3,672,000.  I 
believe  it  has  been  changed  since. 

Senator  WOLCOTT.  When  was  this  money  borrowed? 

Mr.  MINK.  The  trust  deed  was  made  on  the  1st  of  July,  1879,  and 
the  indorsement  followed  shortly  after  that. 

Senator  WOLCOTT.  Are  those  bonds  held  by  the  public  at  large? 

Mr.  MINK.  Yes;  they  are  widely  scattered. 

Senator  WOLCOTT.  Are  they  quoted  on  the  market? 

Mr.  MINK.  Frequently.  They  are  now  worth  in  the  neighborhood 
of  par. 

Senator  WOLCOTT.  Do  these  bonds  cover  any  portion  of  the  1,800 
miles  of  road  of  the  Union  Pacific  Railway  Company? 

Mr.  MINK.  No,  sir;  they  are  merely  promises  to  pay  of  the  Union 
Pacific  Railway  Company,  secured  by  this  pledge  of  securities. 

Senator  WOLCOTT.  So  these  obligations  would  be  merely  the  note  of 
the  company,  secured  by  certain  of  the  stocks  and  bonds  and  property 
of  other  roads  than  those  included  in  the  parent  system? 

Mr.  MINK.  Exactly. 

Senator  WOLCOTT.  On  what  theory  did  you  divert  the  earnings  of 
the  main  line  to  the  payment  of  the  interest  on  those  securities? 

Mr.  MINK.  The  theory  on  which  the  receivers  filed  petitions  asking 
the  order  of  the  court  was  altogether  for  the  purpose  of  holding  together 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  365 

the  system  of  railroads  which  was  turned  over  to  us  under  the  bill  of 
1803.  The  receivers,  when  they  made  the  application  for  orders  to  pay 
interest  on  these  securities,  believed  that  the  business  depression  which 
prevailed  so  generally  would  not  last  as  it  has  lasted,  and  they  thought 
that  they  would  be  able,  at  the  end  of  the  year,  to  do  better.  We  are 
not  paying  the  interest  now  on  those  collateral  trust  obligations. 

Senator  WOLCOTT.  When  did  you  make  the  last  payment  upon  them  ? 

Mr.  MINK.  My  impression  is  that  we  applied  for  leave  to  pay  but  one 
coupon;  and  that  was  the  coupon  due  on  the  1st  of  January,  1894. 

Senator  WOLCOTT.  In  this  instance,  as  in  many  others,  it  is  a  fact, 
is  it  not,  that  the  earnings  of  the  parent  system  were  used  (whether 
wisely  or  unwisely  is  not  to  be  questioned  now)  in  the  payment  of  obli- 
gations outside  of  the  system,  and  in  order  to  secure  the  control  of  all 
the  branches  to  the  parent  system? 

Mr.  MINK.  The  payments  were  made  out  of  interest  that  was  received 
on  the  collateral  trust  obligations — the  Colorado  Central  sevens,  the 
Utah  Northern  sevens,  and  other  high-grade  bonds. 

Senator  WOLCOTT.  Then  you  would  say  that,  as  to  these  payments 
made  by  the  receivers  011  account  of  interest  due,  the  income  came  from 
the  securities  and  the  receivers  were  not  required  to  take  it  from  the 
earnings  of  the  system? 

Mr.  MINK.  That  is  my  impression. 

Senator  WOLCOTT.  The  Eastern  Division  sixes  cover,  I  suppose,  a 
portion  of  the  Government  land-aided  lines? 

Mr.  MINK.  They  do. 

Senator  WOLCOTT.  That  is  a  mortgage  in  advance  of  the  Govern- 
ment lien? 

Mr.  MINK.  It  is. 

Senator  WOLCOTT.  And  the  Middle  Division  sixes  the  same,  I  sup- 
pose? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  Tbe  consolidated  mortgage  sixes  cover  the  mile- 
age not  included  in  the  Government- aided  portion  of  the  road? 

Mr.  MINK.  It  does  cover  that,  practically.  It  is  a  second  mortgage 
on  that  part  of  the  road,  and  you  may  call  it  a  third  mortgage  on  the 
road  to  Denver  east  of  the  three  hundred  and  ninety-fourth  mile  post. 

Senator  WOLCOTT.  You  mean  that  it  is  a  first  mortgage  on  the  non- 
aided  portion  ? 

Mr.  MINK.  Subject  to  the  Denver  Extension  bonds.  It  is  also  claimed 
to  be  a  first  mortgage  on  some  of  the  property  east  of  the  Missouri- 
Kansas  State  line  in  the  State  of  Missouri. 

Senator  WOLCOTT.  So,  as  receivers,  you  felt  it  to  be  your  duty  to  pay 
this  interest  in  order  that  the  Union  Pacific  Hallway  might  be  kept  a 
going  concern  between  Kansas  City  and  Denver? 

Mr.  MINK.  Yes;  I  ought  to  say  that  we  received  from  the  trustees 
about  $220,000,  which  they  had  in  hand,  and  which  was  authorized  to 
be  applied  in  the  payment  of  interest. 

Senator  WOLCOTT.  The  trust  5-per-cent  bonds;  what  are  they? 

Mr.  MINK.  They  are  a  collateral  trust  obligation  of  the  Union  Pacific 
Hallway  Company  like  the  collateral  trust  sixes,  except  that  the  collat- 
eral trust  fives  are  secured  by  other  securities. 

Senator  WOLCOTT.  Given  when? 

Mr.  MINK.  The  trust  was  made  in  1883.  There  are  outstanding  now 
of  these  bonds  about  $4,667,000,  and  they  are  secured  by  $1,169,000 
Colorado  sevens,  $1,809,000  Omaha  and  Hepublican  Valley  fives,  and 
by  other  securities.  These  collateral  trust  bonds,  I  think,  are  selling 
in  the  neighborhood  of  75. 


366  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  WOLCOTT.  That  is  an  obligation  of  the  Union  Pacific  Rail- 
way Company? 

Mr.  MINK.  It  is. 

Senator  WOLCOTT.  Secured  by  obligations  of  other  roads  not  in  the 
parent  system  ? 

Mr.  MINK.  It  is  not  a  mortgage;  it  is  merely  a  security. 

Senator  WOLCOTT.  Have  you  kept  that  paid  up  to  date? 

Mr.  MINK.  No;  my  recollection  is  that  we  paid  but  one  coupon  upon 
that  issue,  the  coupon  due  in  December,  1893. 

Senator  WOLCOTT.  Did  you  receive  from  the  securities  in  the  pledge 
a  sufficient  sum  to  pay  the  interest  on  these  trust  5  percent s? 

Mr.  MINK.  My  impression  is  that  we  did  not. 

Senator  WOLCOTT.  Speaking  in  the  rough,  about  how  much  money 
was  taken  from  the  earnings  of  the  road  to  pay  these  coupons? 

Mr.  MINK.  My  impression  is  that  all  the  money  charged  in  the 
account  of  the  trust  5  perceuts  came  out  of  the  earnings  of  the 
property. 

Senator  WOLCOTT.  Aggregating  how  much  ? 

Mr.  MINK.  Aggregating  $116,925. 

Senator  WOLCOTT.  Then  this  $116,925  would  have  been  applicable 
to  paying  the  interest  on  the  first-mortgage  bonds,  that  are  anterior  to 
the  Government  lieu,  if  it  had  not  been  diverted  to  pay  outside  obliga- 
tions? 

Mr.  MINK.  Yes;  it  might  have  been.  Of  course  the  bill  under  which 
we  were  acting  was  a  bill  not  brought  by  the  trustees  under  the  mort- 
gage, but  by  the  stockholders  and  creditors.  The  moneys  derived  by 
us  from  the  earnings  of  the  railroad  or  from  the  securities  were  held  by 
us  and  applied  as  the  court  directed  us  to  apply  them. 

Senator  WOLCOTT.  It  is  a  matter  of  fact,  is  it  not,  that  you  took,  and 
paid  from  the  ordinary  funds  of  the  company,  on  these  trust  5  per  cents, 
moneys  which  could  have  been  devoted  to  the  payment  of  the  interest 
on  the  first-mortgage  bonds'? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  And  that  those  moneys  amounted  to  $116,925? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  A  payment  which  you  have  ceased  to  continue? 

Mr.  MINK.  Yes,  we  have  ceased  making  these  payments,  leaving  the 
collateral  trust  note  holder  to  resort  to  his  collaterals  and  to  pay  his 
interest  out  of  them. 

Senator  WOLCOTT.  The  Omaha  Bridge  fives  and  the  equipment  trust 
fives  were  given  for  the  structure  of  the  bridge  and  for  the  equipment 
of  the  company? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  Now,  come  to  the  collateral  trust  notes.  What 
obligation  was  that? 

Mr.  MINK.  That  was  a  note  of  the  Pacific  Railway  Company  very 
like  that  of  the  collateral  trust  obligations. 

Senator  WOLCOTT.  Given  when? 

Mr.  MINK.  Given  in  1891. 

Senator  WOLCOTT.  What  time  in  1891? 

Mr.  MINK.  I  think  in  September. 

Senator  WOLCOTT.  Within  about  two  years  of  your  receivership? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  A  note  amounting  to  how  much? 

Mr.  MINK.  There  was  about  seventeen  millions  originally  issued. 
The  amount  now  is  about  eight  and  a  half  millions. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  367 

Senator  WOLCOTT.  The  Denver  extension  bonds — are  these  the  obli- 
gations held  by  the  Denver  extension  mortgagees  as  trustees? 

Mr.  MINK.  They  are  the  trustees. 

Senator  WOLCOTT.  They  hold  the  pledge? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  Has  that  interest  been  kept  paid  up  to  date? 

Mr.  MINK.  I  think  the  receivers  paid  the  interest  on  those  notes 
until  the  1st  of  August,  1894.  Since  that  time  the  trustee  has  held  the 
collections  under  the  trust  for  the  payment  of  the  interest;  and  those 
collections  have  been  quite  sufficient  to  meet  the  interest  obligations. 
I  believe  that  the  last  coupon,  due  on  the  1st  of  February,  has  been 
paid. 

Senator  WOLCOTT.  Is  it  a  fact  that,  since  the  receivership,  the  sums 
used  to  pay  the  interest  on  these  bonds  have  been  furnished  by  the 
interest  and  dividends  paid  by  the  property  pledged? 

Mr.  MINK.  It  is  not  a  fact.  The  collections  from  the  collaterals  dur- 
ing the  period  from  October,  1893,  and  prior  to  the  1st  of  August,  1894, 
were  not  sufficient  to  meet  that  interest.  The  receivers  were  called 
upon  to  advance  considerable  sums.  The  amount  I  have  not  in  my 
mind. 

Senator  WOLCOTT.  Give  a  general  impression  as  to  about  how  much 
the  receivers  advanced  for  that  purpose? 

Mr.  MINK.  I  think  it  might  have  been  about  $150,000. 

Senator  WOLCOTT.  So  that  you  have  advanced  to  pay  the  interest  on 
that  trust  about  $150,000? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  And  about  $116,000  on  the  trust  5  percents? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  On  what  ground  did  you  base  your  application  to 
the  court  fur  an  order  to  make  these  payments  out  of  the  earnings  of 
the  system — I  mean  the  payments  on  these  collateral  trust  notes? 

Mr.  MINK.  So  that  we  might  retain  the  securities  pledged  for  them 
and  which  we  believed  to  be  of  very  great  value,  largely  in  excess  of 
the  collateral  trust  obligations. 

Senator  WOLCOTT.  The  Denver  extension  bond  is  a  first  mortgage 
from  the  three  hundred  and  ninety-fourth  mile  post  to  Denver,  is  it 
not? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  And  a  second  or  third  mortgage  on  the  rest  of 
the  road  ? 

Mr.  MINK.  Yes;  the  security  rests  on  the  western  end  of  the  road. 

Senator  WOLCOTT.  When  did  you  cease  to  pay  interest  on  the  first- 
mortgage  obligations  of  the  Union  Pacific  Bail  way  system  that  are 
superior  to  the  Government  lien  ? 

Mr.  MINK.  The  last  coupon  paid  upon  the  main  line  mortgage  was 
that  of  January,  1895.  The  coupons  for  July,  1895,  and  January,  1890, 
are  now  in  default.  The  trustee  under  the  mortgage  filed  a  bill  asking 
its  foreclosure  in  the  early  months  of  1895.  Under  that  proceeding  a 
petition  was  filed  for  the  payment  of  the  January,  1895,  coupon;  and 
an  order  was  entered  upon  it,  and  the  coupon  was  paid.  A  petition 
has  been  quite  recently  filed  for  an  order  to  pay  the  July,  1895,  coupon, 
but  no  order  has  yet  been  made.  No  doubt  it  will  be  made.  The 
interest  on  the  main -line  mortgage  will  probably  be  paid  up  to  and 
including  July,  1895,  within  a  very  short  time,  and  the  coupon  due  on 
the  1st  of  January,  189G,  will  be  paid  within,  the  next  ninety  days. 


368  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  WOLCOTT.  Was  there  any  purpose  in  failing  or  neglecting 
to  pay  these  coupons  on  the  first-mortgage  bonds  ? 

Mr.  MINK.  No,  sir;  absolutely  none.     You  mean  by  that — 

Senator  WOLCOTT.  I  mean,  was  there  any  ulterior  purpose  to  close 
out  the  Government  interest?  You  are  aware  that  there  is  an  idea 
abroad  that  under  the  plan  of  reorganization,  or  otherwise,  it  might  be 
deemed  advisable  not  to  pay  the  interest  on  the  first-mortgage  bonds. 

Mr.  MINK.  I  do  not  think  that  it  was  ever  deemed  advisable  not  to 
pay  the  interest  on  the  first-mortgage  bonds,  at  least  so  far  as  the 
receivers  are  concerned.  We  have  constantly  used  our  endeavor  to  have 
the  trustee  under  the  first  mortgage  move  (whenever  there  seemed  to 
be  money  enough  for  the  purpose)  for  leave  to  pay  the  interest  upon 
the  first-mortgage  bonds  as  soon  as  we  thought  the  accounts  would 
justify  it. 

Senator  WOLCOTT.  This  was  the  particular  interest,  which  should  be 
paid  first  of  all,  if  you  had  the  funds  wherewith  to  pay  it? 

Mr.  MINK.  Yes.  In  the  early  days  of  the  receivers,  however,  I  do 
not  think  that  the  need  of  paying  that  interest  was  quite  so  prominent 
in  our  minds.  We  were  appointed  under  what  may  be  called  a  general 
bill,  including  all  these  properties,  and  our  hope  was  that  this  system 
of  roads  might  be  kept  together.  We  perhaps  never  dreamed  that  tlie 
disasters  of  1893  and  1894  would  overtake  us.  It,  therefore,  never  was 
the  purpose  of  the  receivers  to  neglect  to  pay  the  interest  on  the  first- 
mortgage  bonds;  and  I  am  sure  there  never  was  such  a  purpose  either 
on  the  part  of  the  trustees  under  the  mortgage. 

Senator  WOLCOTT.  I  suppose  that  when  the  receivers  were  appointed 
nobody  had  any  doubt  that  the  earnings  of  the  whole  system  would  not 
only  pay  the  outstanding  obligations,  but  that,  with  care  and  economy, 
the  receivers  could  bring  the  whole  system  together  again? 

Mr.  MINK.  At  the  outset  that  was  the  general  belief.  Of  course,  as 
time  went  by,  we  began  to  modify  that  belief;  and  we  have  changed  it 
very  decidedly  since  then. 

Senator  WOLCOTT.  You  found  that  one  branch  after  another  has  been 
lopped  off  from  the  general  system  ? 

Mr.  MINK.  We  have  lost  two  important  lines.  The  Oregon  Eailway 
and  Navigation  line  was  taken  off  in  the  summer  of  1894,  and  the  Union 
Pacific,  Denver  and  Gulf  line  in  December,  1893.  We  have,  neverthe 
less,  endeavored  to  keep  up  friendly  relations  with  these  lines,  and  we 
think  that  we  have  succeeded  in  getting  a  fair  share  of  the  traffic  of  all 
of  them. 

Senator  WOLCOTT.  I  suppose  you  are  aware  that  the  contention  has 
been  made  that  the  Government  can  be  foreclosed  of  its  lieu  altogether, 
if  it  fail  to  assert  its  rights  and  to  protect  its  interests,  by  the  failure 
of  the  Union  Pacific  Eailway  Company  to  pay  the  interest  on  the  mort- 
gage superior  to  the  Government  lieu? 

Mr.  MINK.  I  have  heard  that  claim  made. 

Senator  WOLCOTT.  So  that,  by  some  legal  process,  the  receivers, 
although  the  net  earnings  of  the  road  were  sufficient  to  pay  the  interest 
on  the  first  mortgage,  failing  to  do  so,  these  people  would  be  able  to 
foreclose  the  Government  of  the  United  States  out  of  a  great  many 
million  dollars  due  from  the  Union  Pacific  llailway  system.  You  have 
heard  that  claim  made? 

Mr.  MINK.  Often.  So  far  as  the  payment  of  interest  is  concerned, 
there  can  be  no  question  as  to  the  ability  of  the  main  line  of  the  Union 
Pacific  Railway  always  to  earn  the  interest  on  twenty-seven  millions 
of  dollars* — certainly  if  anything  like  the  present  conditions  with  refer- 


GOVERNMENT    DEBT    OF    THE   PACIFIC    RAILROADS.  3G9 

ence  to  the  branch  lines  are  maintained.  Therefore,  I  have  thought 
there  never  has  been  anything  in  that  suggestion,  so  far  as  the  pay- 
ment of  interest  is  concerned.  The  only  danger  (so  far  as  I  have 
looked  at  it)  has  been  owing  to  the  fact  that  a  large  amount  of  principal 
is  due. 

Senator  WOLCOTT.  We  can  take  care  of  the  principal  when  it  becomes 
due.  That  is  another  matter.  The  claim  was  made,  was  it  not,  that 
the  Government  can  be  foreclosed  out  of  its  interest  in  this  property 
because  the  interest  due  on  the  prior  mortgage  is  not  paid,  and  that,, 
therefore,  there  may  be  a  sale  of  the  property? 

Mr.  MINK.  The  claim  was  made;  and  the  receivers,  whenever  they 
thought  the  accounts  justified  it,  insisted  upon  applying  to  the  court 
for  leave  to  pay  the  coupons  due  on  the  first-mortgage  bonds,  and  we 
have  been  generally  successful. 

Senator  WOLCOTT.  This  committee  is  directly  and  particularly  inter- 
ested in  preserving  the  interest  of  the  Government  in  this  railroad 
property.  That  is  the  main  purpose  for  the  existence  of  the  committee. 
Can  you  assure  the  committee  that  the  interest  upon  the  liens  prior  to 
the  Government  lien  will  continue  to  be  paid? 

Mr.  MINK.  No,  sir.  In  answering  your  questions  I  have  limited  my 
answers  to  the  main  line.  So  far  as  that  mortgage  is  concerned  I  have 
made  as  full  and  comprehensive  an  answer  as  I  can. 

Senator  WOLCOTT.  Do  you  anticipate  the  meeting  of  the  interest 
due  on  the  first  liens  prior  to  the  Government  lien? 

Mr.  MINK.  I  do.  I  think  the  defaults  in  the  interest  will  be  met.  Of 
course  the  default  in  principal  can  not  be. 

Senator  WOLCOTT.  I  am  simply  referring  to  the  coupons  due. 

Mr.  MINK.  If  the  Union  Pacific  system,  as  now  constituted,  can  be 
kept  together,  there  is  no  reasonable  doubt  as  to  the  payment  of  the 
interest. 

Senator  WOLCOTT.  Now  as  to  the  other  portions  of  the  system. . 

Mr.  MINK.  In  Kansas  my  recollection  is  that  no  coupons  have  been 
paid  on  the  main  line  on  the  mortgage,  prior  to  the  United  States  lien, 
since  the  coupon  of  February,  1894.  In  other  words,  my  present  recol- 
lection is  that  the  coupons  for  August,  1894,  February  and  August, 
1895,  and  February,  1896,  on  the  Eastern  Division  bonds,  which  cover 
the  first  140  miles,  are  all  in  arrears. 

Senator  WOLCOTT.  West  from  Armstrong  ? 

Mr.  MINK.  West  from  Armstrong.  The  Middle  Division  bond  is  a 
bond  covering  a  piece  of  road  from  the  one  hundred  and  fortieth  mile 
post  to  the  three  hundred  and  ninety-fourth  mile  post.  I  believe  that 
on  those  bonds  the  coupons  of  June  and  December,  1894,  and  of  June 
and  December,  1895,  are  in  default. 

Senator  WOLCOTT.  Amounting  to  how  much?  About  what  is  the 
deficit? 

Mr.  MINK.  The  Eastern  Division  bonds  amount  to  $2,240,000.  The 
amount  of  interest  in  default  would  be  about  $250,000.  The  Middle 
Division  sixes  amount  to  $4,063,000,  on  which  the  interest  in  default 
would  be  about  $480,000. 

Senator  WOLCOTT.  Then,  in  fact,  for  the  Eastern  Division  and  the 
Middle  Division  the  amount  of  interest  in  default  is  about  $750,000. 

Mr.  MINK.  Substantially  so. 

Senator  WOLCOTT.  Do  you  hope  to  meet  these  payments? 

Mr.  MINK.  The  situation  in  reference  to  the  Kansas  Pacific  line  is  very 
much  involved.  I  do  not  know  whether  I  can  say  that  we  hope  to  meet 
the  interest  or  not.  We  were  made  receivers  under  the  Ames  bill  in 


370  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

October,  1893,  and  we  continued  to  operate  all  the  lines  as  receivers 
under  that  bill  up  to  the  ICth  of  July,  1894,  when  a  bill  was  filed  by 
the  trustees  under  the  consolidated  mortgage  of  the  Kansas  Pacific 
Railway  Company,  and,  under  that  bill,  the  claim  has  been  made  by  the 
trustees  that  the  revenues  from  the  Kansas  Pacific  Division  became 
impounded  for  the  benefit  of  the  consolidated  mortgage  bondholders. 
Since  that  time  no  interest  has  been  paid  on  account  of  any  of  the 
bonds  of  the  Kansas  Pacific  Division.  If  you  look  at  the  printed 
statement  you  will  find  on  page  33  of  the  copy  of  a  petition  recently 
filed  by  the  receivers,  on  which  a  hearing  is  now  in  progress  at  Omaha, 
and  it  contains  a  statement  of  the  income  derived  from  the  operations 
of  the  consolidated  mortgage  Division  up  to  September,  1895.  The 
amount  of  the  surplus  earnings,  $458,000,  is  claimed  to  have  been 
impounded  for  the  benefit  of  the  consolidated  mortgage  bondholders. 
Whether  the  earnings  are  so  impounded  as  against  the  rights  of  the 
Eastern  and  Middle  divisions  I  have  no  opinion. 

Senator  WOLCOTT.  There  is  a  claim  that  whatever  may  be  the  earn- 
ings of  the  Kansas  Pacific,  none  of  them  are  applicable  to  the  coupons 
anterior  to  the  Government  lien. 

Mr.  MINK.  The  bill  has  been  filed. 

Senator  BRICE.  Have  you  stopped  paying  the  interest? 

Mr.  MINK.  The  Kansas  Pacific  is  in  our  hands  as  receivers  under 
this  consolidated  mortgage,  and  no  orders  have  been  made  by  the  court. 

Senator  BRICE.  Have  you  ever  applied  for  such  orders? 

Mr.  MINK.  We  make  no  such  applications.  They  are  made  by  the 
trustees. 

Senator  BRICE.  You  leave  the  matter  to  the  creditors — to  indi- 
viduals'? 

Mr.  MINK.  That  is  our  invariable  rule  when  the  mortgages  are  in 
court. 

Senator  BRICE.  And  the  mortgages  in  this  Kansas  Pacific  case  are 
in  court? 

Mr.  MINK.  In  the  case  of  the  Kansas  Pacific  road  every  subdivision 
of  the  property  is  now  in  court  by  its  mortgagees.  In  the  case  of  the 
Kansas  Pacific  we  have  this  situation :  First,  the  shareholders'  receiver- 
ship of  October,  1893;  then  the  foreclosure  receivership,  extending  from 
the  17th  of  July,  1894,  to  the  29th  of  July,  1895,  when  the  trustees  under 
the  Denver  extension  mortgage  filed  an  intervening  petition,  which 
may  have  had  the  effect  of  impounding  the  earnings  of  that  subdivision 
for  the  benefit  of  that  mortgage.  Afterwards,  on  the  5th  of  August, 
1895,  the  trustees  on  the  Kansas  Division  collateral  mortgage  filed  their 
bill,  and  on  the  21st  of  November,  1895,  the  Eastern  Division  mortgage 
trustees  filed  their  bill.  In  view  of  that  complicated  situation,  that  peti- 
tion sets  out  the  complications  and  nsks  the  court  to  give  instructions 
as  to  the  distribution  of  the  earnings,  and  the  hearings  in  that  case 
have  now  commenced. 

Senator  BRICE.  What  mortgages  on  the  Kansas  Pacific  road  are 
superior  to  the  Government  lien  ? 

Mr.  MINK.  The  Eastern  Division  mortgage  and  the  Middle  Division 
mortgage. 

The  CHAIRMAN.  You  stated  that  the  trustees  made  an  application  to 
the  court  to  permit  the  payment  of  past  due  coupons? 

Mr.  MINK.  After  the  filing  of  bills  to  foreclose  the  mortgages,  the 
receivers  left  to  the  trustees  the  applications  to  the  court  to  have  the 
coupons  paid.  When  the  mortgage  is  not  in  court  (as  is  the  case  in  the 
Union.Pacific  Coal  Company)  the  receivers  have  usually  filed  petitions 
asking  the  court  for  authority  to  pay  the  coupons. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  371 

The  CHAIRMAN.  In  paying  those  coupons  all  the  holders  are  paid 
share  and  share  alike? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  Is  there  an  application  filed  to-day  for  the  pay- 
ment of  past  due  coupons  on  the  Eastern  and  Middle  divisions? 

Mr.  MINK.  The  petition  which  the  receivers  filed  will  in  the  end  result 
in  the  determination  of  the  sums  which  ought  to  be  carried  to  each 
division.  I  have  not  any  doubt  that  other  petitions  asking  for  instruc- 
tions to  pay  coupons  will  be  filed. 

Senator  WOLCOTT.  But,  as  a  matter  of  fact,  there  has  been  no  appli- 
cation by  the  trustees  of  the  Eastern  and  Middle  divisions  bondholders 
for  the  payment  of  their  interest. 

Mr.  MINK.  None  that  I  know  of. 

Senator  WOLCOTT.  Who  are  those  bondholders? 

Mr.  MINK.  They  are  scattered  far  and  wide. 

Senator  WOLCOTT.  Are  you  advised  that  the  holders  of  those  bonds 
have  joined  in  the  reorganization  scheme? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  Is  it  your  opinion  that  it  is  any  portion  of  that 
reorganization  scheme  that  the  holders  of  those  bonds  shall  not  apply 
for  their  interest,  so  that  the  Government  may  be  said  to  be  imperiled 
in  its  lien  by  the  failure  to  pay  the  interest  on  these  bonds? 

Mr.  MINK.  That  is  not  my  impression. 

Senator  WOLCOTT.  What  is  your  impression  as  to  the  reason  why 
these  people  have  not  asked  for  payment  of  their  interest? 

Mr.  MINK.  My  impression  is  that  they  have  not  asked  for  the  pay- 
ment of  their  interest  because  of  the  complicated  situation,  to  which  I 
have  referred,  growing  out  of  the  various  suits. 

Senator  WOLCOTT.  But  would  you  not  think  that  if  they  were  not 
entitled  to  any  interest  out  of  the  earnings  of  the  road  on  which  their 
mortgage  is  a  first  lien,  the  sooner  they  knew  that  fact  the  better? 

Mr.  MINK.  That  is  a  very  reasonable  conclusion.  However,  the  situ- 
ation is  so  complicated  that  I  feel  quite  sure  that  the  trustees  under 
the  mortgage  must  have  been  aware  that  the  court  would  never  enter- 
tain a  petition  asking  an  order  for  the  payment  of  interest,  unless  the 
account  filed  by  the  receivers  showed  that  the  interest  ought  to  be 
paid. 

Senator  WOLCOTT.  You  think  that  the  situation  is  so  complicated 
that  the  court  would  be  sure  not  to  order  payment  of  interest  on  these 
securities  ? 

Mr.  MINK.  I  think  that  the  court  would  not  order  payment  of  inter- 
est until  it  had  before  it  an  accounting  showing  that  the  interest  had 
been  earned,  and,  in  the  case  of  the  Kansas  Pacific,  no  such  account 
can  be  made. 

Senator  WOLCOTT.  If  the  court  would  be  slow  do  you  not  think  that 
the  Government  would  be  equally  slow  to  declare  those  bonds  in 
default? 

Mr.  MINK.  I  suppose  so. 

Senator  WOLCOTT.  You  say  that  the  court  would  not  order  interest 
to  be  paid  out  of  the  earnings  applicable  to  it  because  of  certain  com- 
plications ? 

Mr.  MINK.  I  did  not  intend  to  say  that.  The  earnings  have  been 
derived  from  the  operation  of  the  entire  Kansas  Pacific  division,  extend- 
ing from  Kansas  City  and  Leavenworth  on  the  east  to  Denver  on  the 
west.  There  are  four  mortgages  in  court  endeavoring  to  assert  their 
rights  j  and  the  fifth  mortgage,  which  has  an  interest  in  these  earnings, 
is  not  yet  in  court.  1  think  that  until  the  rights  of  each  of  these  niort- 


372  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

gages  are  determined,  the  court  would  be  very  slow  to  make  an  order 
in  any  of  those  cases  directing  the  payment  of  interest;  and  it  was  with 
that  idea  in  the  ininds  of  the  receivers  that  we  presented  this  compli- 
cated situation  to  the  court  and  asked  for  instructions. 

Senator  WOLCOTT.  When  did  you  iile  your  petition8? 

Mr.  MINK.  Six  or  eight  weeks  ago. 

Senator  WOLCOTT.  So  that  for  more  than  a  year  the  trustees  of  this 
Eastern  Division  first  mortgage  failed  to  make  application  to  the  court 
for  the  payment  of  their  interest,  and  have  not  made  such  application 
up  to  this  time1? 

Mr.  MINK.  My  impression  is  that  no  such  applications  are  pending. 

Senator  BEIGE.  Who  are  the  trustees  under  that  mortgage? 

Mr.  MINK.  My  recollection  is  that  the  trustees  under  the  Eastern 
Division  mortgage  are  H.  M.  Alexander  and  Judge  J.  F.  Dillon.  Judge 
Dillon  has  only  recently  been  made  a  cotrustee. 

Senator  WOLCOTT.  Cotrustee  with  whom? 

Mr.  MINK.  With  Mr.  Alexander. 

The  CHAIRMAN.  In  keeping  the  accounts  of  the  Kansas  City  and 
Denver  Division,  is  there  any  difference  made?  Do  you  keep  them  as 
part  of  the  aided  portion  of  the  road,  separately  from  the  nou  aided  por- 
tion, or  are  the  accounts  all  kept  in  one  pool? 

Mr.  MINK.  They  are  all  kept  in  one  account.  We  do  keep,  for  the 
benefit  of  the  United  States  Commissioner  of  Bailroads,  an  account  of 
the  earnings  of  the  aided  portion  as  distinct  from  the  earnings  of  the 
nonaided  portion  of  the  road,  and  I  presume  we  will  endeavor  to  use 
that  at  the  hearing  which  is  now  on  at  Omaha.  I  do  not  know,  however, 
that  we  can  induce  the  trustees  under  the  Denver  Extension  mortgage 
to  accept  that  account  as  representing  what  that  division  is  fairly 
entitled  to,  the  earnings  not  having  been  divided  in  proportion  to 
distance. 

The  CHAIRMAN.  I  was  going  to  ask  you  that  question,  whether  they 
are  divided  in  proportion  to  distance  or  by  a  general  average? 

Mr.  MINK.  By  a  general  average,  so  far  as  the  revenue  is  concerned. 
I  think  that  the  mileage  is  always  a  factor,  so  far  as  expenses  are  con- 
cerned— the  locomotives  mileage,  train  mileage,  car  mileage,  and  gen- 
eral expenses  are  the  factors. 

Senator  WOLCOTT.  As  to  the  Middle  Division  mortgage  trustees,  who 
are  they? 

Mr.  MINK.  I  have  no  memorandum  here  of  the  trustees  under  that 
mortgage.  My  record  says  that  there  are  two  vacancies,  but  my  recol- 
lection is  that  those  vacancies  were  filled  some  time  ago,  and  that  Mr. 
John  A.  Stewart  and  Judge  Dillon  were  made  trustees. 

Senator  WOLCOTT.  What  are  the  professional  relations  of  Judge 
Dillon  to  the  receivers? 

Mr.  MINK.  Judge  Dillon  is  counsel  to  the  receivers. 

Senator  WOLCOTT.  So  that  your  own  counsel  is  the  trustee  in  this 
first  mortgage? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  And  he  has  not  made  any  application,  either  as 
your  counsel  or  as  trustee,  for  the  payment  of  any  of  this  back  interest? 

Mr.  MINK.  I  believe  not.  His  application  would  not  come  to  us  until 
after  it  was  filed  in  court. 

Senator  WOLCOTT.  But  Judge  Dillon,  as  counsel  to  the  receivers,  as 
well  as  trustee  under  this  mortgage,  would  notify  one  of  the  five  receiv- 
ers of  such  application  if  he  made  it? 

Mr.  MINK.  He  might  or  he  might  not. 


GOVERNMENT   DEBT    OP    THE    PACIFIC    RAILROADS.  373 

Senator  WOLCOTT.  It  is  his  duty  to  do  so,  is  it  not? 

Mr.  MINK.  I  think  not. 

Senator  WOLCOTT.  Do  you  not  consider  it  your  duty  to  keep  ad^  ised 
of  all  the  applications  for  payment  of  interest  that  are  filed  in  court? 

Mr.  MINK.  Judge  Dillon,  if  he  prepared  a  petition,  would  prepare  it 
only  after  a  conference  with  his  cotrustee.  That  petition  would  go  to 
the  files  of  the  court,  and  we  perhaps  might  not  know  about  it  until  it 
came  back  to  us  on  reference  to  a  master. 

Senator  WOLCOTT.  Do  you  not  advise  your  counsel  as  to  whether  you 
want  to  resist  a  reference  or  not,  or  as  to  whether  you  want  to  enter  an 
appearance? 

Mr.  MINK.  All  petitions  of  that  character  are  referred  to  the  master 
as  a  matter  of  course. 

Senator  WOLCOTT.  And  you  are  not  usually  advised  until  after  ref- 
erence to  a  master? 

Mr.  MINK.  No,  sir. 

Senator  WOLCOTT.  And  you  have  not  been  advised  of  a  reference  to 
a  master  in  the  matter  of  the  Kansas  Pacific  line? 

Mr.  MINK.  No ;  we  have  not. 

Senator  BRICE.  Who  are  the  trustees  under  the  consolidated  mort- 
gage? 

Mr.  MINK.  Eussell  Sage  and  George  J.  Gould. 

Senator  BRICE.  That  is  the  only  one  in  which  you  are  receivers? 

Mr.  MINK.  That  was  the  first  mortgage  to  file  a  bill  of  foreclosure. 

Senator  WOLCOTT.  What  does  this  consolidated  mortgage  cover? 

Mr.  MINK.  It  is  a  first  mortgage  on  the  lands  east  of  the  three  hun- 
dred and  eightieth  milepost  in  Kansas.  It  is  a  second  mortgage  on 
the  lands  west  of  the  three  hundred  and  eightieth  milepost  in  Kansas 
and  Colorado,  and  it  is  a  second  mortgage  on  the  line  west  of  the 
three-hundred  and  eightieth  milepost,  subject  to  the  Denver  Extension 
bonds.  It  is  also  substantially  a  fourth  mortgage  on  the  road  east  of 
the  three  hundred  and  ninety-fourth  milepost.  I  say  "  substantially," 
because  there  are  some  small  issues  of  bonds  not  worth  referring  to. 
It  is  therefore  subject  to  the  first  mortgage  of  the  Eastern  Division, 
next  to  the  lien  of  the  United  States,  and  next  to  the  Denver  Extension 
bonds. 

Senator  WOLCOTT.  Then  it  is  the  objections  of  Messrs.  Gould  and 
Sage,  trustees,  that  are  preventing  the  payment  of  interest  on  those 
bonds? 

Mr.  MINK.  It  is  not  their  objections.  It  is  the  complications  that 
grow  out  of  the  matter. 

Senator  STEWART.  Have  you  considered  the  question  whether  Judge 
Dillon's  position  is  not  a  little  peculiar,  being  counsel  for  the  receivers 
and  a  trustee  for  the  mortgage?  Do  not  those  duties  come  in  conflict? 

Mr.  MINK.  I  believe  I  never  thought  of  it.  My  recollection  is  that 
Judge  Dillon's  appointment  as  one  of  the  trustees  is  of  a  very  recent 
date.  I  think  it  is  a  matter  of  three  or  four  months  ago. 

Senator  WOLCOTT.  Then  the  action  of  Messrs.  Gould  and  Sage  would 
make  an  apparent  foreclosure  possible,  and  would  make  it  possible  that 
the  Government  interest  on  this  Kansas  Pacific  Branch  would  be  wiped 
out? 

Mr.  MINK.  In  part,  possibly  that  may  be  so.  I  can  not  express  an 
opinion  upon  it.  It  involves  a  legal  proposition.  As  a  business  ques- 
tion, however,  I  do  not  think  that  it  is  of  much  consequence,  because 
the  Kansas  Pacific  consolidated  mortgage  makes  it  necessary  to  take 
care  of  the  interest  on  these  first- mortgage  bonds. 


374  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  WOLCOTT.  Nevertheless,  it  has  not  been  done  up  to  this  time 
and  there  is  an  apparent  default? 

Mr.  MINK.  Yes  It  is  a  fact  that,  so  far  as  the  Kansas  Division  is 
concerned,  prior  to  the  17th  of  July,  1894,  when  Gould  and  Sage  filed 
their  bills  to  foreclose  the  mortgage,  the  proportion  of  the  earnings 
attributable  to  the  Kansas  Pacific  Division  was  very  much  less  than 
the  proportion  of  the  interest  charges  which  were  attributable  to  that 
division  plus  the  interest  charges  local  to  that  division.  The  deficit  on 
page  29  amounts  to  something  like  $400,000.  The  receivers  have  sug- 
gested that  perhaps  it  would  be  advisable  that  this  deficit  shoud  be 
made  good  out  of  funds  which  are  claimed  to  have  been  impounded. 

Senator  WOLCOTT.  The  net  earnings  of  your  whole  1,800  miles  of 
road  are  amply  sufficient  to  pay  this  interest,  are  they  not? 

Mr.  MINK.  They  are  sufficient  to  pay  the  first- mortgage  interest. 

Senator  WOLCOTT.  To  pay  the  interest  on  the  mortgage  superior  to 
the  Government  lien  f 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  You  have  not  hesitated  to  take  money  from  your 
whole  road  to  pay  promissory  notes  of  the  company,  have  you? 

Mr.  MINK.  We  have  not  hesitated  to  take  money  which  came  into 
our  hands  under  the  bill,  and  to  pay  those  promissory  notes,  on  the 
order  of  the  court. 

Senator  WOLCOTT.  These  moneys  came  in  under  the  head  of  earnings 
of  the  road  ? 

Mr.  MINK.  They  came  in  from  the  property,  which  was  made  up  in 
part  from  the  railroad  property  and  a  great  part  of  it  from  securities  to 
which  the  mortgage  did  not  attach,  and  on  the  revenues  from  which 
the  mortgage  gave  no  claim. 

The  CHAIRMAN.  What  source  of  revenue  was  there,  other  than  the 
earnings  of  the  road? 

Mr.  MINK.  All  those  securities  pledged  under  this  collateral  trust. 
I  have  here  a  memorandum  of  miscellaneous  income  derived  from  the 
13th  of  October,  1893,  to  the  30th  of  September,  1895,  and  the  income 
from  those  sources  amounted  to  $663,130. 

The  CHAIRMAN.  And  what  is  the  whole  amount  that  would  be  appli- 
cable to  the  payment  of  interest  outside  of  those  miscellaneous  items? 

Mr.  MINK.    $3,516,000. 

Senator  WOLCOTT.  This  Union  Pacific  system  is  composed  of  two 
trunk  lines  parallel  with  each  other  until  they  reach  Cheyenne  and 
Denver,  where  they  connect  with  a  northern  and  southern  line,  with  an 
extension  of  one  of  them  to  Ogden? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  You  work  it  all  as  one  system? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  And  you  think  it  is  essential  to  keep  it  as  one 
system  ? 

Mr.  MINK.  In  my  judgment  it  is  very  desirable. 

Senator  WOLCOTT.  You  would  make  any  sacrifice  rather  than  lop  off 
one  half  of  it — the  Kansas  Pacific? 

Mr.  MINK.  I  think  that  the  line  should  be  held  together.  It  is  cer- 
tainly for  the  interest  of  the  United  States  to  have  the  Kansas  Pacific 
property  held  with  the  Union  Pacific. 

Senator  WOLCOTT.  Why  should  you  have  hesitated  to  have  made  a 
payment  of  this  interest  out  of  your  general  earnings  if  you  had  not 
been  prevented  by  the  action  of  Sage  and  Gould  as  trustees? 

Mr.  MINK.  I  had  no  hesitation  in  the  matter  that  has  any  signifi- 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  375 

cance.  Our  duty,  as  receivers,  is  to  administer  the  property  under 
orders  made  by  the  court.  After  the  bill  was  filed  to  foreclose  the 
consolidated  mortgage  on  the  Kansas  Pacific  a  claim  was  made  that 
the  earnings  of  that  division  were  impounded  for  the  benefit  of  the 
mortgagee.  The  rights  of  any  prior  lien  holder  can  be  easily  deter  ^ 
mined  on  intervention. 

Senator  WOLCOTT.  But  they  have  gone  a  couple  of  years  without  any 
intervention  ? 

Mr.  MINK.  They  have. 

Mr.  WOLCOTT.  Nobody  has  taken  pains  to  present  the  matter  to  the 
court  until  you  took  the  initiative? 

Mr.  MINK.  That  is  my  recollection. 

Senator  WOLCOTT.  Who  is  the  counsel  for  Sage  and  Gould! 

Mr.  MINK.  Mr.  Winslow  S.  Pierce. 

Senator  WOLCOTT.  He  is  the  counsel  of  record  for  the  consolidated 
mortgage? 

Mr.  MINK.  That  is  my  recollection. 

Senator  BRICE.  On  this  branch  of  the  subject  I  have  only  one  ques- 
tion to  ask.  It  is  apparent,  from  what  examination  has  been  had,  that 
on  the  threshold  of  this  whole  matter  there  is  a  cloud  on  the  action  of 
the  receivers,  and  of  the  trustees,  and  counsel,  and  on  the  whole  fabric. 
It  is  true  (and  I  think  you  should  explain  to  the  committee)  that  there 
is  practically  but  one  mind  in  charge  of  all  the  various  phases  of  the 
case,  and  that  the  divisions  and  partitions  between  them  are  merely 
technical — I  mean  between  the  mortgage  trustees  and  the  counsel.  You 
should  explain  why  you  have  not  paid  this  interest,  and  whether  the 
nonpayment  arises  out  of  any  attempt  to  create  and  make  a  default.  I 
think  you  ought  to  give  a  full  explanation  of  that  if  you  have  not 
already  done  so.  I  think,  in  justice  to  the  receivers,  you  ought  to  explain 
that  situation. 

Mr.  MINK.  I  am  indebted  to  you,  Senator  Brice.  So  far  as  the  inter- 
est obligations  of  the  Kansas  Pacific  line  are  concerned,  Mr.  Pierce 
(who  is  now  sitting  in  the  room)  has  suggested  to  me  that,  as  he  remem- 
bers it,  the  trustees  under  the  Denver  Extension  mortgage,  who  are  the 
holders  as  pledges  of  a  large  number  of  the  Eastern  Division  and  Mid- 
dle Division  bonds,  had  filed  an  intervening  petition  asking  an  order 
for  the  payment  of  one  or  more  coupons.  I  merely  mention  that,  and 
reserve  the  right  to  correct  my  testimony  if  I  find  it  to  be  a  fact.  So 
far  as  the  action  of  the  receivers  in  relation  to  the  payment  of  interest 
on  mortgages  prior  to  the  lien  of  the  United  States  is  concerned,  I  can 
only  say  that  the  aim,  the  constant  aim  and  purpose,  of  the  receivers  (three 
of  whom  were  appointed  or  were  supposed  to  have  been  appointed — two 
of  them  certainly— at  the  instance,  and  for  the  benefit,  of  the  United 
States),  has  been  always  to  have  the  moneys  applied  for  the  payment 
of  this  first  mortgage  interest  from  the  day  that  the  disasters  of  1893 
had  begun  to  impress  us  as  being  irretrievable. 

Prior  to  that  time,  as  I  have  already  mentioned,  our  hope  and  pur- 
pose was  to  hold  together  all  these  various  properties.  But  after  the 
summer  of  1894  we  began  to  realize  that  it  was  impossible  to  do  it.  We 
then  bent  our  energies  and  attempts  so  to  shape  the  policy  of  the  trus- 
tees where  possible  (of  our  own  people,  certainly)  as  to  pay  all  the  inter- 
est on  the  first-mortgage  bonds.  Two  of  the  receivers — Mr.  Coudert 
and  Mr.  Doane — were  charged  with  the  duty  of  protecting  the  interests 
of  the  United  States  in  this  property.  The  United  States,  for  some 
reason,  has  so  far  failed  to  become  a  party  to  the  record.  It  seemn  to 


376  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

mo  that  its  rights,  if  they  are  in  jeopardy,  ought  to  be  subject  to  the 
decrees  of  the  court. 

Senator  WOLOOTT.  That  is  the  opinion  of  a  great  many  people  who 
have  securities  that  are  junior  to  the  first-mortgage  bonds. 

Senator  BRICE.  I  am  directing  your  attention  to  these  apparent  facts. 
You  earned  four  and  a  half  million  dollars  net  one  year,  and  five  and 
one-eighth  millions  net  another  year,  and  the  total  interest  obligations 
in  each  of  those  years,  including  everything  held  by  the  Government 
and  everything  behind  the  Government  lien,  fell  much  short  of  those 
apparent  total  earnings.  And  yet,  not  only  did  the  receivers  fail  to  pay 
the  interest  on  the  bonds  on  other  divisions  of  the  road,  but  they  failed 
to  pay  the  interest  on  the  first  mortgage  bonds. 

Mr.  MINK.  The  answer  to  that  is  very  simple.  To  begin  with,  in 
October,  1893,  when  we  were  made  receivers  of  these  properties,  we 
took  them  in  with  almost  no  money  in  the  purse  of  the  corporation. 
We  began  to  pay  on  the  1st  of  December,  1893. 

Senator  BRIOE.  As  that  is  a  very  serious  matter,  the  explanation  of 
which  is  absolutely  necessary  to  this  committee,  so  that  it  may  be  sub- 
mitted to  the  Senate,  I  suggest  that  you  frame  your  answer  at  your 
own  convenience  and  have  it  put  in  the  record. 

Mr.  MINK.  I  thank  you  very  much;  1  will  do  so. 

Senator  WOLCOTT.  I  think  it  is  due  to  anybody  who  knows  anything 
about  this  system,  as  I  do,  to  say  that  no  one  who  is  familiar  with  it 
questions  your  single  minded  devotion  to  the  interests  of  the  property, 
or  that  you  desire  to  keep  it  together  as  a  going  concern  for  the  build- 
ing up  of  the  interests  of  the  country.  In  Mr.  Ames's  lifetime  you 
were  regarded  as  his  first  adviser  and  friend  in  that  matter? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  You  have  been  with  the  company  for  nearly  a 
quarter  of  a  century? 

Mr.  MINK.  Yes;  and  I  have  been  very  much  interested  in  the  progress 
of  the  property  and  very  much  concerned  about  its  disasters. 

Senator  WOLCOTT.  I  will  not  question  you  as  to  the  necessity  of  five 
receivers  for  this  property;  but,  as  we  are  on  that  branch  of  the  inquiry, 
I  would  like  to  know  whether  the  court  has  yet  fixed  the  compensation 
of  the  five  receivers? 

Mr.  MINK.  The  court  has  not  yet  fixed  their  compensation.  It  has 
made  orders  by  which  we  are  drawing  on  account. 

Senator  WOLCOTT.  The  fact  is,  I  suppose,  that  if  this  railroad  is 
burdened  with  five  receivers,  two-fifths  of  them,  at  least,  are  imposed 
upon  it  by  the  action  of  the  Attorney- General  of  the  United  States,  or 
at  his  suggestion? 

Mr.  MINK.  I  do  not  like  to  answer  that  question.  The  appointment 
of  two  additional  receivers  was  made  at  the  instance  of  the  United 
States.  I  think  that  it  has  been  a  very  great  advantage  to  the  receiver- 
ship to  have  the  counsel  and  aid  of  Mr.  Coudert  and  Mr.  Doane. 

Senator  WOLCOTT.  And  the  advice  and  counsel  of  five  more  men — 
if  skilled  and  friendly  and  cautious — would  be  of  help  also? 

Mr.  MINK.  It  might  be,  but  I  think  the  receivership  at  present  is 
sufficiently  large. 

Senator  WOLCOTT.  You  think  that  five  receivers  are  enough? 

Mr.  MINK.  The  interests  of  the  United  States  would  seem  to  me  pretty 
well  represented  in  the  receivership. 

Senator  WOLCOTT.  You  think  that  five  receivers  are  enough? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  As  to  the  integrity  of  the  system  in  its  operation, 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  377 

is  it  operated  inf  connection  with,  or  by  close  track  relations  with,  the 
Chicago  and  Northwestern  road  ? 

Mr.  MINK.  It  is. 

Senator  WOLCOTT.  Has  the  contract  been  published  which  shows 
under  what  circumstances  the  two  roads  exchange  business? 

Mr.  MINK.  My  impression  is  that  the  contract  has  been  published  a 
number  of  times. 

Senator  WOLCOTT.  That  is  my  impression.    Would  you  be  a  custo 
dian  of  such  a  contract  if  it  existed  f 

Mr.  MINK.  I  would  be  the  custodian  either  of  the  original  or  of  a 
copy.  Technically,  Mr.  Millar,  the  assistant  comptroller,  would  be  its 
custodian. 

Senator  WOLCOTT.  If  there  are  any  agreements  in  writing,  I  would 
be  glad  for  the  committee  to  have  them,  so  as  to  see  what  the  relations 
are  between  the  Chicago  and  Northwestern  and  the  Union  Pacific  com- 
panies. 

Mr.  MINK.  I  will  furnish  them  to  the  committee. 

The  CHAIRMAN.  What  is  the  character  of  this  contract  with  the  Chi- 
cago and  Northwestern? 

Mr.  MINK.  It  is  a  contract  for  close  and  harmonious  operation  and 
for  a  division  of  rates. 

Senator  WOLCOTT.  Have  you  as  yet  any  agreement  with  the  Missouri 
Pacific? 

Mr.  MINK.  Not  that  I  know  of.  My  impression  is  that  our  relations 
with  the  Missouri  Pacific  are  not  more  intimate  than  they  are  with  the 
Alton  road. 

The  committee  here  took  a  recess  until  2.30  p.  m. 

After  the  recess  the  examination  of  Mr.  Mink  was  continued. 

Senator  WOLCOTT.  I  find  on  Iqoking  over  some  of  the  past  testi- 
mony that  Mr.  Monroe  gave  the  gross  earnings  of  the  Union  Pacific 
Company  in  1892  as  upward  of  $20,000,000;  of  1893,  as  upward  of 
$17,000,000;  and  of  1894  and  1895,  as  upward  of  $14,000  each.  Does 
that  include  the  1,825  miles  of  the  system? 

Mr.  MINK.  They  are  the  earnings  of  the  1,822  miles  owned  by  the 
Union  Pacific  Eailway  Company. 

Senator  WOLCOTT.  When  does  the  financial  year  of  the  Union  Pacific 
Company  end? 

Mr.  MINK.  It  runs  with  the  calendar  year. 

Senator  WOLCOTT.  Are  the  earnings  of  1896  a  little  larger  than  those 
of  1895  for  so  far? 

Mr.  MINK.  I  think  they  are  a  shade  better.  1  have  no  statement  of 
the  earnings  of  the  aided  portion  of  the  railway  for  any  part  of  1896  as 
distinct  from  the  earnings  of  the  whole  family  of  roads;  but  on  the 
entire  system  the  earnings  for  January  and  February  of  1896  exceed 
those  of  January  and  February,  1895,  by  about  $179,000.  Of  course  a 
good  deal  of  that  is  due  to  the  fact  that  there  has  been  one  more  day  in 
February  of  this  year. 

Senator  WOLCOTT.  Then  the  earnings  for  this  year  are  practically 
about  the  same  as  those  for  last  year  ? 

Mr.  MINK.  They  are  practically  the  same. 

Senator  WOLCOTT.  From  your  long  experience  of  these  properties, 
what,  in  your  opinion,  is  the  earning  capacity,  based  upon  present  con- 
ditions, of  the  Union  Pacific  Railway  proper — the  1,825  miles? 

Mr.  MINK.  That  is  a  very  difficult  question  to  answer.  But,  on  the 
assumption  that  the  relations  which  have  so  long  existed  between  the 
Union  Pacific  and  its  branch  lines  are  to  be  maintained  and  preserved, 


378  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

I  should  say  that  a  company  might  safely  take  over  that  property  and 
reorganize  it  and  assume  the  charges  set  out  in  the  plan  of  the  reor- 
ganization committee,  say,  $4,000,000.  I  think  it  would  stand  that  as  a 
fixed  charge. 

Senator  WOLCOTT.  The  past  years  have  been  years  of  remarkable 
and  unusual  depression  f 

Mr.  MINK.  Yes;  since  the  summer  of  1893. 

Senator  WOLCOIT.  Are  you  aware  that  everybody  in  that  section  of 
country  hopes  and  believes  in  increased  prosperity  for  it,  and  do  you 
share  that  feeling? 

Mr.  MINK.  I  do,  in  a  great  part. 

Senator  WOLCOTT.  Of  course,  I  realize  that  you  can  not  ask  investors 
to  put  money  in  with  any  glowing  hopes  for  the  future,  and  yet,  in  all 
human  probability,  nothing  can  be  worse  than  the  existing  conditions. 

Mr.  MINK.  Nothing  can  affect  the  earnings  of  the  Union  Pacific  and 
throw  them  below  those  of  1893  and  1894  unless  it  was  to  be  a  complete 
revolution  in  regard  to  the  make-up  of  the  whole  system.  In  that 
event,  I  think  it  would  be  almost  impossible  for  anybody  to  make  an 
estimate  of  the  earning  capacity  of  the  road. 

Senator  WOLCOTT.  Suppose  you  lose  the  Oregon  Short  Line? 

The  CHAIRMAN.  They  have  lost  it  now. 

Mr.  MINK.  No;  we  have  never  lost  it. 

The  CHAIRMAN.  Are  you  receiver  for  it? 

Mr.  MINK.  Yes. 

Senator  BRTCE.  You  would  lose  it  under  the  reorganization  plan  ? 

Mr.  MINK.  Yes. 

Senator  BRICE.  If  the  reorganization  plan  were  carried  out,  you 
would  not  have  the  Oregon  Short  Line  in  this  system? 

Mr.  MINK.  No. 

Senator  BRICE.  Then  the  question  must  be  put  upon  the  system  as 
left  by  the  reorganization  plan? 

Mr.  MINK.  It  is  very  difficult  for  me  to  answer  the  question. 

Senator  WOLCOTT.  But  you  indorse  the  general  scope  of  the  reor- 
ganization plan  ? 

Mr.  MINK.  I  think  that,  with  given  conditions,  as  they  exist  to-day, 
the  property  will  stand  the  annual  charge  of  four  millions,  but  it  would 
not  do  so  if  the  branch  lines  were  taken  away. 

Senator  WOLCOTT.  Do  you  expect  to  lose  the  Oregon  Short  Line? 

Mr.  MINK.  There  is  a  strong  probability  that  we  shall  retain  it;  but 
it  is  very  difficult  to  say  what  the  outcome  will  be.  To-day  the  Union 
Pacific  Company  owns  fifteen  millions  of  the  twenty-six  millions  of  stock 
issued  by  the  Oregon  Short  Line.  That  stock  is  held  by  J,  P.  Morgan 
&  Co.,  as  trustees.  Under  the  scheme  of  reorganizing  the  Oregon  Short 
Line,  if  Morgan  &  Co.  should  pay  the  assessment  on  the  stock  held  by 
them,  we  should  own  about  one  third  of  the  stock. 

Senator  BRTCE.  But  there  is  no  provision  in  the  reorganization  scheme 
for  retaining  the  Oregon  Short  Line? 

Mr.  MINK.  There  is  no  such  provision. 

Senator  BRICE.  Therefore,  in  the  scheme  which  you  present  to  this 
committee  for  the  reorganization  of  a  new  company,  there  is  no  contem- 
plation of  having  the  Oregon  Short  Line  as  a  portion  of  the  system? 

Mr.  MINK.  There  may  be  no  expressed  plan.  It,  nevertheless,  should 
be  a  part  of  that  plan,  in  the  end  to  control  that  branch  line  system; 
otherwise  the  plan  based  upon  a  fixed  annual  charge  of  four  millions 
could  not  be  carried  out. 

Senator  WOLCOTT.  How  much  would  it  fall  short  if  it  were  an  inde- 
pendent company,  standing  alone;  what  charges  would  it  bear? 


GOVERNMENT    DEBT    OF    TTTE    PACIFIC    RAILROADS.  379 

Mr.  MINK.  I  can  only  make  an  estimate.  No  one  could  make  any 
forecast  of  what  tbe  result  would  be,  but  I  made  some  figures  within  a 
day  or  two  in  an  endeavor  to  determine  that  matter  for  myself;  and  I 
have  brought  them  with  me.  In  1894  the  net  earnings  of  the  Union 
Pacific  after  the  payment  of  taxes  were  $4,300,000.  Now,  the  gross 
earnings  of  the  Union  Pacific  Company  from  traffic  interchanged  with 
branch  lines  in  every  direction  amounted  to  $5,500,<  :00.  It  is  very  hard 
to  make  any  estimate  of  what  the  net  percentage  of  the  expense  of 
moving  that  business  was;  but,  assuming  that  it  was  50  per  cent,  that, 
would  leave  $2,700,000  which  went  to  our  revenue  derived  from  these 
branches. 

Senator  WOLCOTT.  But  you  do  not  do  business  on  your  own  lines  at 
50  per  cent  of  the  gross  earnings'? 

Mr.  MINK.  No,  the  cost  of  operation  is  very  much  above  that;  but  I 
put  it  on  the  basis  of  50  per  cent  because  the  branch  lines  have  borne 
the  expense  of  one  of  the  terminals,  and  the  business  done  from  the 
branch  lines  is  subject  to  only  a  minimum  cost.  If  the  operation  of  this 
branch-line  business  cost  50  per  cent  of  the  gross  receipts,  then  we  had 
$2,700,000  of  net  income  from  the  branch  lines.  1  suppose  that  the  loss 
of  these  lines  would  not  deprive  us  of  all  of  this  traffic.  We  should  be 
always  in  the  market  for  some  of  the  east-bound  and  west-bound  traffic 
of  the  branch  lines,  and  the  question  is  what  proportion  of  it  we  should 
receive.  Assuming  that  we  might  lose  half  of  it,  that  would  still  leave 
us  a  net  income  of  $1,375,000  from  these  branch  lines,  and  if  you  deduct 
that  from  the  $4,300,000  of  the  present  receipts  it  would  bring  the  esti- 
mate of  net  earnings  to  about  $2,900,000. 

Senator  WOLCOTT.  Does  that  answer  the  question1? 

Mr.  MINK.  As  well  as  I  can  answer  it  now,  with  the  light  I  have. 

Senator  WOLCOTT.  All  the  through  freight  from  California  has  only 
one  terminal;  is  not  that  true1? 

Mr  MINK.  That  is  true. 

Senator  WOLCOTT.  How  much  would  you  lose  if  you  lost  all  the 
branch-line  business;  and  how  much  would  you  lose  if  you  lost  one- 
half  of  it? 

Mr.  MINK.  My  estimate  is  that  the  cost  of  moving  this  interchange 
traffic  does  not  exceed  50  per  cent;  but  if,  as  has  been  suggested  here, 
the  cost  is  the  same  as  the  average  cost  of  moving  all  our  traffic,  say 
70  per  cent,  then  if  we  lost  it  all,  the  loss  would  be  $1,655,000  net. 

Senator  WOLCOTT.  And  if  you  lost  half  of  it,  it  would  be  about 
$825,000? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  You  have  not  the  Union  Pacific,  Denver,  and 
Gulf  business  now,  have  you? 

Mr.  MINK.  We  have  a  large  part  of  it. 

Senator  WOLCOTT.  But  not  so  much  as  when  you  controlled  it? 

Mr.  MINK.  I  think  we  have  got  a  very  large  profit  there. 

Senator  WOLCOTT.  Do  you  think  you  have  got  as  much  as  if  vou  con- 
trolled it? 

Mr.  MINK.  No;  we  have  lost  something  by  losing  the  control  of  it. 

Senator  WOLCOTT.  Do  you  not  think,  as  a  matter  of  fact,  that  your 
road  has  lost  all  it  can  lose? 

Mr.  MINK.  No,  sir;  I  think  that  the  loss  of  the  Oregon  Short  Line 
would  be  almost  irretrievable. 

Senator  WOLCOTT.  But,  from  the  terminals  of  the  road,  and  from  the 
country  through  which  it  runs,  and  from  the  ordinary  direction  of  its 
freight,  you  know  that  it  is  utterly  impossible  that  that  freight  could  be 
all  taken  away  from  you. 


380  GOVERNMENT    DEDT    OF    THE    PACIFIC    RAILROADS. 

Mr.  MINK.  I  suppose  not. 

Senator  WOLCOTT.  In  what  way  would  the  Oregon  Short  Line  get 
through  to  the  East  if  not  through  your  line? 

Mr.  MINK.  By  way  of  the  Rio  Grande  line.  The  activity  of  those 
strong  lines  east  of  Denver — the  Burlington,  the  Rock  Island,  the  Santa 
Fe,and  others — would  be,  of  course,  brought  into  play  against  the  Union 
Pacific;  and  I  think,  therefore,  that  the  loss  of  the  Oregon  Short  Line 
business  would  be  a  great  misfortune  for  the  Union  Pacific. 

Senator  WOLCOTT.  But  the  Union  Pacific  would  lose  that  business 
by  the  reorganization  plan  which  you  indorse. 

Mr.  MINK.  I  beg  pardon ;  I  did  not  mean  to  indorse  it. 

Senator  WOLCOTT.  That  reorganization  plan  is  suggested  here  as  a 
plan  that  expressly  excludes  from  the  apparent  future  of  the  property 
any  consideration  of  the  Oregon  Short  Line,  does  it  not? 

Mr.  MINK.  Any  specific  consideration. 

Senator  WOLCOTT.  Would  you  say,  generally  speaking,  that  you 
think  that  $4,000,000  of  net  profit  could  be  realized  under  the  reorgani- 
zation plan? 

Mr.  MINK.  I  think  so. 

Senator  WOLCOTT.  Does  that  leave  the  stock  of  the  Union  Pacific 
Railway  of  any  value? 

Mr.  MINK.  The  Union  Pacific  stock  is  absolutely  valueless. 

Senator  WOLCOTT.  I  mean  the  stock  of  a  new  concern  which  would 
be  able  to  pay  $4,000,000  of  fixed  charges  a  year,  what  would  be  the 
value  of  that  stock  ? 

Mr.  MINK.  A  merely  nominal  value. 

Senator  WOLCOTT.  You  think  that  $4,000,000  a  year  would  exhaust 
the  earning  capacity  of  this  property? 

Mr.  MINK.  No,  sir;  I  might  not  want  to  put  the  maximum  capacity 
at  those  figures.  The  stock  would  have  some  value  of  course,  but  the 
amount  earned  in  excess  of  that  $4,000,000  is  not  likely  to  be  very 
great  in  my  judgment;  not  greater  than  the  needs  of  the  corporation. 

Senator  WOLCOTT.  Go  back  to  1892,  before  the  bad  years,  and  give 
us  the  net  earnings  of  the  1,822  miles  of  the  Union  Pacific  Railroad. 

Mr.  MINK.  The  steed  which  carried  us  so  bravely  along  in  1892  has 
stumbled  since  then. 

Senator  WOLCOTT.  Yes,  and  the  mints  have  been  closed  to  silver 
since  then. 

Senator  BRICE.  The  "crime  of  1873 "  has  had  its  effect. 

Mr.  MINK.  The  steed's  knees  are  barked,  and  he  will  not  sell  for  so 
much  in  the  market. 

Senator  WOLCOTT.  Do  you  think  that  the  prosperity  of  that  country 
has  forever  left  it? 

Mr.  MINK.  No,  sir;  not  forever. 

Senator  WOLCOTT.  Do  you  think  that  the  maximum  earning  of  the 
road  is  practically  measured  by  its  present  earning? 

Mr.  MINK.  I  think  that,  with  the  changed  conditions,  and  with  the 
enormous  number  of  railroad  lines  traversing  that  country,  it  is  not 
possible  that  the  earnings  of  1892  will  be  repeated  lor  a  good  many 
years  to  come. 

Senator  WOLCOTT.  What  were  the  net  earnings  of  the  Union  Pacific 
Railroad  Company  in  1891  and  1892? 

Mr.  MINK.  The  net  earnings  of  1892  were  $8,500,000.  The  net  earn- 
ings of  1893  were  $0,200,000.  The  net  earnings  of  1892  were  very  much 
larger  than  the  net  earnings  of  1891,  which  were  $7,800,000.  The  net 
earnings  of  1890  were  $7,200,000. 

Senator  WOLCOTT.  We  should  feel  very  badly  in  the  West  if  we 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  381 

thought  these  earnings  had  permanently  suffered.  You  have  had  no 
new  railroads  out  there  to  compete  with  yours  since  1893  which  you  did 
not  have  in  1892? 

Mr.  MINK.  Yes;  we  have  the  Burlington.  I  think  that  the  Burling- 
ton has  finished  its  line  through  to  Billings  since  1892,  and  has  become 
a  great  competitor.  The  Great  Northern  line  has  gone  to  the  coast  since 
1892. 

Senator  WOLCOTT.  With  the  exception  of  some  roads  at  the  north 
of  your  line,  there  are  no  new  lines  in  competition  with  you  within  the 
last  two  years'? 

Mr.  MINK.  No ;  with  the  exception  of  the  two  I  have  mentioned. 

Senator  WOLCOTT.  So,  practically,  if  prosperity  returns  to  that  sec- 
tion of  country,  there  is  no  reason  why  the  earnings  of  the  Union  Pacific 
should  not  be  as  good  in  the  future  as  in  the  past? 

Mr.  MINK.  The  trend  of  prices  in  the  market  indicates  a  very  well- 
grounded  opinion  that  they  never  will  be.  Four  million  dollars  a  year 
would  be  a  safe  and  reasonable  figure  for  a  reorganization  committee 
to  assume  as  fixed  charges  for  that  road. 

Senator  WOLCOTT.  How  much  is  the  first-mortgage  incumbrance  on 
such  portions  of  the  road  and  terminals  as  are  not  embraced  in  the 
Government- aided  line;  in  other  words,  what  is  the  face  of  the  bonded 
indebtedness  of  so  much  of  the  road  as  is  not  included  in  the  Government- 
aided  portion  of  the  road — I  mean  the  mortgages,  not  the  collateral 
obligations'? 

Mr.  MINK.  About  $20,000,000. 

Senator  WOLCOTT.  Suppose  that  your  road  was  bonded  at  $100,000,000 
at  4  per  cent;  $20,000,000  of  your  obligations  would  cover  the  terminals 
and  the  nonaided  portion  of  the  road  I 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  Would  the  road  not  bring  more  than  that  if  it 
was  put  up  at  sale  ? 

Mr.  MINK.  I  am  not  able  to  answer  that  question.  If  the  bondholders' 
judgment  of  the  value  of  the  property  is  worth  anything  it  would  indi- 
cate that  it  would  bring  pretty  nearly  that. 

Senator  WOLCOTT.  Therefore  you  would  have  a  value  of  $80,000,000 
left  in  your  road. 

Mr.  MINK.  That  is  assuming  that  the  reorganization  plan  is  carried 
out. 

Senator  WOLCOTT.  I  am  leaving  out  of  view  all  the  reorganization 
plan.  I  am  assuming  that  we  should  start  in  with  this  property  at 
$100,000,000,  and  that  we  will  be  able  to  acquire  that  portion  of  it 
not  covered  by  Government  aid  at  $20,000,000.  That  would  leave 
us  $80,000,000,  which  the  other  part  of  the  property  would  be  worth, 
if  we  could  place  our  4  per  cent  bonds  at  par.  What  is  the  amount  of 
the  bonded  indebtedness  separate  from  the  Government  lieu  on  the 
Government-aided  portion  of  the  road  ? 

Mr.  MINK.  Thirty-three  million  five  hundred  thousand  dollars. 

Senator  WOLCOTT.  And  what  is  the  amount  of  the  Government 
indebtedness  ? 

Mr.  MINK.  About  $52,000,000. 

Senator  WOLCOTT.  So  that,  apparently,  if  these  securities,  in  the 
order  of  their  priority,  could  be  exchanged  at  par  for  a  4  per  cent 
security  (which  you  say  would  be  a  perfectly  safe  and  adequate  secur- 
ity) you  could  practically  pay  the  whole  of  the  mortgage  superior  to 
the  Government  lien  and  the  whole  of  the  Government  debt,  could 
you  not? 

Mr.  MINK.  I  do  not  know  that  I  meant  to  say  that. 


382  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  WOLCOTT.  But  is  not  that  the  result? 

Mr.  MINK.  That  might  be  the  result. 

Senator  WOLCOTT.  I  find  the  total  of  the  bonded  indebtedness  supe- 
rior to  the  Government  lien,  and  the  Government  indebtedness  to  be 
$85,500,000. 

Mr.  MINK.  I  think  that  an  issue  of  $100,000,000  of  4  per  cent  bonds 
(if  negotiations  could  be  had  between  the  present  lien  holders  and  the 
reorganization  committee)  by  which  all  the  present  liens  could  be  taken 
up  and  a  new  issue  of  consolidated  bonds  to  the  amount  of  $100,000,000 
put  out  in  place  of  them,  could  be  safely  carried  by  the  reorganized 
company. 

Senator  WOLCOTT.  I  am  leaving  out  of  view  for  the  moment  the  fact 
that  there  are  subsequent  iiicuinbrances  and  the  fact  that  there  are 
stockholders,  and  I  am  trying  to  reach  an  actual  value  of  the  property, 
based  on  its  earning  capacity.  You  say  that  it  is  good  for  four  millions 
net  a  year,  at  least1? 

Mr.  MINK.  I  do. 

Senator  WOLCOTT.  If  that  be  so,  it  is  good  for  an  issue  of  $100,000,000 
of  bonds  at  4  per  cent? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  That  being  true,  it  is  good  for  4  per  cent  on  all 
the  lines  prior  to  the  Government  lien  and  on  almost  all  the  total 
amount  of  the  Government  debt,  principal  and  interest,  less  the  sink- 
ing fund,  is  it  not? 

Mr.  MINK.  I  think  that  that  is  so;  I  limit  my  answer,  however,  in 
this  particular.  I  do  not  know  that,  in  the  negotiation  of  these  bonds 
by  the  reorganization  committee,  it  would  be  right  or  proper  to  put 
out  the  bonds  of  the  new  company,  dollar  for  dollar,  against  all  the 
various  debts  which  we  have  enumerated,  because  that  would  leave 
the  reorganized  company  without  any  resources  whatever.  Every 
dollar  would  be  invested  in  the  debts  of  the  old  company;  and  if  you 
are  going  on  to  take  care  of  the  future,  the  reorganized  company  must 
go  into  the  business  with  something  in  its  treasury.  The  plan  of  the 
reorganization  committee  contemplates  a  reserve  of  something  like 
$13,000,000  and  I  think  that  that  is  a  very  reasonable  reserve. 

Senator  WOLCOTT.  The  infirmity  of  the  whole  business  lies  in  the 
fact  that  there  is  nobody  forthcoming  to  give  the  $100,000,000  and  to 
wipe  out  existing  securities;  but  they  desire,  by  assessment  and  other- 
wise, to  protect  their  own  securities  and  to  assess  other  subordinate 
securities;  and  they  desire  to  make  a  good  concern  of  it  by  recognizing 
many  existing  securities  which  are  subordinate  to  the  Government  lien. 
Is  not  that  true? 

Mr.  MINK.  Does  that  not,  after  all,  make  it  perfectly  clear  that  the 
best  way  for  the  United  States  to  solve  the  question  and  to  obtain  the 
value  of  its  interest  in  the  property  is  to  do  as  an  ordinary  creditor 
would  do — go  into  a  conference  and  treat  and  negotiate  for  a  place  in 
the  reorganization  committee?  That  is  what  any  ordinary  lien  holder 
would  do.  That  is  what  the  lien  holders  all  over  the  country  are  doing 
to-day.  You  take  a  default  and  almost  immediately  the  bondholders 
come  together  and  organize  a  committee  charged  with  the  duty  of 
arranging  the  business,  and  the  action  of  such  a  committee  is  affirmed 
by  the  stockholders.  I  think  (and  my  confidence  in- the  matter  is  very 
strong)  that  if  the  interest  of  the  United  States  could  be  intrusted  to 
a  commission  made  up  of  conspicuous  and  prominent  citizens  charged 
and  empowered  to  negotiate  for  a  settlement,  and  able  to  meet  the  other 
lien  holders  and  to  treat  with  them  as  people  treat  in  the  ordinary,  every- 
day transactions  of  life,  this  matter  could  be  settled  inside  of  six  months. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  383 

Senator  WOLCOTT.  It  is  possible,  however,  that  the  unpleasant  expe- 
rience that  the  Government  is  passing  through,  whereby  it  is  asked  to 
sacrifice  about  50  per  cent  of  its  claim,  may  make  it  reluctant  to  submit 
its  interest  to  another  reorganization  concern. 

Mr.  MINK.  The  Government  may  not  be  required  to  sacrifice  any- 
thing. 

Senator  WOLCOTT.  I  am  trying  to  get  your  idea  of  what  the  Govern- 
ment should  do.  You  say  that  the  Government  should  trade  away  its 
interest,  and  that  the  customary  way  is  for  people  to  get  together  and 
negotiate.  Is  it  an  ordinary  thing  to  organize  syndicates  and  to  under- 
write! 

Mr.  MINK.  I  think  it  is  very  ordinary. 

Senator  WOLCOTT.  Is  this  reorganization  committee  underwritten? 

Mr.  MINK.  I  do  not  know. 

Senator  WOLCOTT.  Have  you  heard  that  it  is  underwritten1? 

Mr.  MINK.  If  I  have  heard  it,  it  has  made  no  impression  on  my  mind. 

Senator  WOLCOTT.  Do  you  know  Mr.  Schiff? 

Mr.  MINK.  I  have  not  met  him. 

Senator  WOLCOTT.  Do  you  know  that  he  is  the  financial  agent  of 
the  reorganization  committee? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  Do  you  know  the  Schieff  interest  in  the  reorgan- 
ization plan? 

Mr.  MINK.  I  do  not;  I  may  have  known  it  when  I  read  the  plan. 

Senator  WOLCOTT.  Have  you  seen  the  confidential  circulars  which 
have  been  issued  to  subscribers? 

Mr.  MINK.  I  believe  not;  I  have  really  paid  very  little  attention  to 
this  matter,  except  as  occasional  inquiries  have  been  made  of  me  in  my 
official  capacity.  I  have,  in  a  measure,  enc  oui  aged  the  deposit  of  bonds 
for  the  reorganization  committee,  because  I  have  thought  where  bonds 
like  those  of  the  Union  Pacific  Eailroad  Company  have  been  held  in 
very  high  estimation  for  twenty-five  years  and  have  been  scattered  all 
over  the  world,  it  was  the  most  natural  thing  in  the  world  that  they 
should  be  deposited  with  some  committee  charged  with  the  duty  of 
representing  them.  To  that  extent  I  have  interested  myself  in  them, 
but  beyond  that  I  have  no  interest  in  them. 

Senator  WOLCOTT.  Your  relation  to  the  Union  Pacific  has  been 
simply  fiduciary? 

Mr.  MINK.  My  relation  to  the  Union  Pacific  is  almost  nothing  to-day. 
My  duties  as  receiver  take  up  all  my  time. 

Senator  WOLCOTT.  I  will  not  question  you  as  to  the  wisdom  or 
unwisdom  of  the  reorganization  system  from  the  point  of  view  of  the 
Government  becoming  a  trader,  because  if  I  did  I  should  have  to  go 
through  all  the  different  securities  and  to  get  you  to  show  me  where 
other  creditors,  with  so  important  a  lien  and  so  prior  a  lien  as  that  of 
the  United  States,  have  made  such  a  great  sacrifice  as  the  Government 
is  called  upon  to  make  by  this  proposed  scheme;  therefore  I  will  con- 
fine myself  to  questions  as  to  the  value  of  the  property  and  as  to  the  bur- 
dens that  it  bears.  Did  you  read  the  testimony  of  Mr.  Anderson,  your 
coreceiver? 

Mr.  MINK.  I  read  part  of  it.  I  was  not  well  when  Mr.  Anderson 
was  here. 

Senator  WOLCOTT.  Did  you  notice  that  he  makes  a  recommendation 
that  the  two  properties — the  Union  Pacific  and  the  Central  Pacific — 
should  be  sold  together  to  the  highest  bidder? 

Mr.  MINK.  That  was  his  recommendation  as  a  Government  director 


384  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  WOLCOTT.  Will  yon  give  the  committee  the  benefit  of  your 
opinion  as  to  that  recommendation  of  Mr.  Anderson? 

Mr.  MTNK.  As  I  understand  it,  his  idea  was  that  the  liens  of  the 
United  States  on  the  main  lines  of  the  Union  Pacific  and  on  the  main 
line  of  the  Central  Pacific  should  be  foreclosed  and  the  property 
acquired,  either  in  the  interest  of  some  reorganization  committee  or  in 
the  interest  of  the  United  States,  and  then  put  up  at  auction. 

Senator  WOLCOTT.  Yes. 

Mr.  MINK.  I  think  very  well  of  that  proposition,  except  that,  when  I 
read  the  recommendation,  I  thought  it  would  completely  sacrifice  the 
interest  of  the  United  States  in  the  Kansas  Pacific  line. 

Senator  WOLCOTT.  Otherwise  would  you  approve  of  it? 

Mr.  MINK.  I  think  that  the  two  roads  would  make  a  very  strong  line. 

Senator  WOLCOTT.  Would  you  favor  putting  the  Central  Pacific  and 
the  Union  Pacific  together? 

Mr.  MINK.  I  think  they  would  make  a  wonderfully  strong,  effective 
road. 

Senator  WOLCOTT.  From  your  point  of  view,  what  would  you  think 
of  it? 

Mr.  MINK.  Beally,  I  have  no  very  strong  convictions  about  it,  because 
I  have  scarcely  thought  of  it  except  during  the  last  few  days. 

Senator  WOLCOTT.  You  are  not  of  the  opinion,  I  take  it,  that  the 
Government  could  economically  operate  these  roads? 

Mr.  MINK.  I  am  not. 

Senator  WOLCOTT.  You  do  not  share  in  that  view? 

Mr.  MINK.  I  do  not  think  that  the  United  States  ought  to  engage  in 
railroad  business. 

Senator  WOLCOTT.  You  do  not  believe  in  the  plan  of  the  Government 
operating  railroads? 

Mr.  MINK.  I  do  not. 

Senator  WOLCOTT.  Do  you  think  that  the  Union  Pacific  property 
would  bring  a  better  price  if  it  were  sold  in  conjunction  with  the  Central 
Pacific  than  if  it  were  sold  separately? 

Mr.  MINK.  It  is  very  hard  to  venture  an  opinion  on  that.  I  think  it 
very  doubtful.  I  think  that  if  the  Union  Pacific  Eailroad  property 
could  be  reorganized,  and  if  substantially  the  same  sort  of  relation 
could  be  made  with  the  branch  lines  as  formerly,  it  would  make  a 
reasonably  successful  system  of  railroad. 

Senator  WOLCOTT.  What  would  you  think  of  the  idea  of  selling 
the  interest  of  the  Government  in  the  Union  Pacific,  separately  from 
its  interest  in  the  Kansas  Pacific  and  separately  from  its  interest  in 
the  Central  Branch  of  the  Union  Pacific? 

Mr.  MINK.  I  think  that  the  Government  would  realize  more  money 
by  the  sale  of  both  properties  together.  I  think  that  the  interest  of 
the  United  States  in  the  Kansas  Pacific  line  is  worth,  relatively,  a  very 
small  sum.  I  think,  on  the  other  hand,  that  the  interest  of  the  United 
States  in  the  main  line  is  worth  something.  That,  also,  is  very  hard 
to  decide.  But  the  interest  of  the  United  States  in  the  Central  Branch 
of  the  Union  Pacific  is  almost  valueless. 

Senator  WOLCOTT.  The  line  from  Kansay  City  to  Denver  is  a  good 
line? 

Mr.  MINK.  It  is  a  very  good  line,  but  it  has  tremendous  competition. 
There  are  a  great  many  lines  through  to  Denver.  If  the  lien  of  the 
United  States  was  foreclosed  on  that  line,  and  if  it  had  no  connection 
with  the  West,  I  should  suppose  that  the  384  miles  of  the  road  east 
would  be  worth  almost  nothing. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  385 

Senator  WOLCOTT.  You  spoke  of  the  proposition  for  reorganization. 
What  do  you  understand,  the  present  proposition  to  be,  which  has  been 
made  in  the  interest  of  the  Union  Pacific  reorganization? 

Mr.  MINK.  I  may  be  mistaken,  but  I  have  got  the  impression  more 
from  reading  the  newspapers  than  from  communication  with  others.  I 
understand  that  the  plan  most  favored  to-day  is  a  plan  by  which  the 
principal  of  the  subsidy  debt  should  be  met,  first,  by  the  application  of 
the  sinking  fund,  and  that  then  the  balance  of  the  principal  should  be 
paid,  and  that  thereupon  the  unreimbursed  interest  account  should 
be  extended  fifty  years  and  should  carry  interest  at  2  percent;  that  is 
what  I  understand  to  be  the  proposition  that  meets  with  most  favor. 

Senator  WOLCOTT.  How  do  you  understand  that  this  deferred  settle- 
ment is  to  be  secured  ? 

Mr.  MINK.  By  a  second  mortgage  on  the  property  of  the  1,822  miles  of 
road,  subject  only  to  a  prior  lien,  not  of  $100,000,000,  but  of  $75,000,000. 

Senator  WOLCOTT.  Would  this  second  mortgage  consist  solely  of 
deferred  interest,  or  would  it  be  shared  with  other  bonds! 

Mr.  MINK.  It  would  consist  solely  of  the  deferred  interest  account. 

Senator  WOLCOTT.  Would  you  consider  that  a  good  security? 

Mr.  MINK.  1  think  it  would  be  safe,  because,  as  I  understand  it,  the 
proposition  was  that  the  charges  for  transportation  for  the  Government 
should  be  withheld,  and  should  be  applied  toward  meeting  the  install- 
ment of  interest  on  this  mortgage.  If  the  unreimbursed  account  is  to 
amount  to  $40,000,000  (it  will  not  be  quite  so  much),  2  per  cent  on  that 
would  impose  an  annual  charge  on  the  property  of  $800,000.  The 
United  States,  I  think,  can  always  make  itself  secure  for  that  interest 
by  reserving  its  transportation  account. 

Senator  WOLCOTT.  There  is,  in  the  minds  of  a  great  many  people,  a 
serious  objection  to  such  a  relation  between  the  Government  of  the 
United  States  and  railroads  as  would  induce  the  Government  to  ship  the 
bulk  of  its  business  by  a  particular  line  of  road.  Many  of  the  officials 
of  competitive  and  parallel  lines  are  largely  of  opinion  that  the  Govern- 
ment should  be  free  to  ship  by  any  of  the  lines  which  can  carry  its  busi- 
ness. Do  you  think  that  that  relation  would  present  to  these  other 
lines  an  element  of  unfairness? 

Mr.  MINK.  I  suppose  that  that  opinion  would  be  entertained  by  rival 
and  competing  lines.  It  might,  or  it  might  not,  be  well  founded. 

Senator  WOLCOTT.  It  would  be  of  interest  to  the  Union  Pacific 
Company  to  have  the  Government  in  such  relations  with  it  as  that  the 
Government  would  ship  its  materials  by  it? 

Mr.  MINK.  Most  assuredly;  but  the  fact  is  that  the  location  of  the 
Union  Pacific  Road,  in  connection  with  the  locations  of  the  New  York 
Central,  the  Pennsylvania,  the  Lake  Shore,  and  the  Michigan  Central, 
is  so  favorable  that,  in  my  judgment,  those  roads  will  always  obtain  a 
very  large  part  of  the  transportation  of  the  Government,  particularly 
of  the  mails. 

Senator  WOLCOTT.  So  that  the  road  would  be  very  apt  to  receive 
the  Government  transportation,  irrespective  of  its  connection  with  the 
Government? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  So  that,  practically,  that  relation  between  the 
Government  and  the  railroad  would  cut  no  figure  in  the  matter? 

Mr.  MINK.  No,  except  that  it  might  present  an  element  of  security 
to  the  Government. 

Senator  WOLCOTT.  If  the  Government  did  not  have  to  take  out  its 
interest  on  these  bonds  in  trade,  would  it  still  be  secure  by  that  2  per 
cent  interest? 


386  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  MINK.  It  would,  on  the  assumption  that  the  first  or  prior  mort- 
gage would  be  limited  to  $75,000,000  at  4  per  cent.  That  would  impose 
an  annual  charge  of  $3.000,000.  Then  there  would  be  behind  that  this 
second  lien  of  $40,000,000  at  2  per  cent,  imposing  an  annual  charge  of 
$800,000;  and  that,  of  course,  would  be  the  maximum  charge  on  the 
road.  I  understand  that  in  this  plan  of  reorganization,  on  the  basis  of 
$100,000,000,  $13,000,000  is  reserved  for  improvements— a  very  necessary 
and  proper  reservation. 

Senator  WOLOOTT.  You  think  that  that  proposition  is  about  the  best 
which  the  property  can  stand? 

Mr.  MINK.  I  think  that  the  annual  charge  on  the  property  ought  not 
to  exceed  $4,000,000. 

Senator  STEWART.  State  again  just  how  the  principal  of  the  Gov- 
ernment claim  is  to  be  paid. 

Mr.  MINK.  The  proposition  was  this,  that  the  principal  of  the  debt, 
amounting  to  $33,000,000,  should  be  met  first  by  the  application  of  the 
sinking  fund  held  under  the  Thurinan  Act. 

The  CHAIRMAN.  Fifteen  million  dollars? 

Mr.  MINK.  Yes;  if  that  is  the  sum.  That  then  the  difference  between 
this  $15,000,000  (supposing  that  to  be  the  amount  of  the  sinking  fund) 
and  the  $33,000,000  was  to  be  raised  by  the  reorganization  committee 
and  paid  in  cash,  so  that  the  principal  of  the  debt  should  be  extinguished, 
that  thereafter  the  interest  (say  $40,000,000)  should  be  extended  fifty 
years  and  should  carry  interest  at  2  per  cent. 

Senator  STEWART.  Was  there  any  provision  for  a  sinking  fund  to  pay 
off  the  bonds  at  the  end  of  fifty  years? 

Mr.  MINK.  There  is  no  provision  for  a  sinking  fund. 

Senator  STEWART.  That  would  be  quite  important. 

The  CHAIRMAN.  It  is  simply  an  agreement  to  pay  at  the  end  of  fifty 
years  T 

Mr.  MINK.  Yes;  on  that  theory  (the  Hubbard  plan)  there  would  be 
imposed  on  this  reorganized  property  just  about  the  same  maximum 
charge  which  I  have  first  supposed— nearly  $4,000,000  ($3,800,000). 

Senator  WOLCOTT.  Have  you  read  the  testimony  of  your  colleague, 
Mr.  Anderson? 

Mr.  MINK.  I  have  not  read  it. 

Senator  WOLCOTT.  Mr.  Anderson  testified,  on  page  47  of  the  record, 
as  follows : 

Senator  WOLCOTT.  If  a  mortgage  drawing  3  per  cent  interest  on  the  1,400  uiilet 
covered  by  the  Government  loan  would  be  a  good  proposition  for  the  Government  to 
accept,  better  than  $35,000,000  in  cash,  please  tell  us  why  a  mortgage  drawing  2 
per  cent,  covering  the  whole  amount  of  principal  and  interest  with  a  sinking  fund, 
is  not  better  than  50  per  cent  of  the  amount  in  cash.  Does  the  ditt'ereiice  of  1  per 
cent  furnish  a  reason  why  the  Government  should  settle  at  50  cents  011  the  dollar1!? 

Mr.  ANDEHSON.  It  does.  A  2  per  cent  bond  is  only  worth  two-thirds  of  a  3  per 
cent  bond.  A  3  per  cent  bond  such  as  you  describe  may  be  worth  60  cents  on  the 
dollar,  and  a  2  per  cent  bond  would  bo  worth  only  40  cents  on  the  dollar,  as  the 
security  is  not  very  good. 

Would  you  say  that  a  fifty-year  bond  drawing  2  per  cent  interest  is 
only  worth  two-thirds  as  much  as  a  3  per  cent  bond  ? 

Mr.  MINK.  That  is  pretty  hard  to  tell;  one  can  only  determine  the 
value  by  the  exchange;  but  my  judgment  would  be  that  a  2  per  cent 
fifty-year  bond  would  sell  not  far  away  from  two-thirds  as  much  as  a  3 
per  cent  fifty-year  bond. 

Senator  WOLCOTT.  What  do  you  think  a  3  per  cent  bond  would  be 
worth  as  a  second  mortgage  on  this  property  ? 

Mr.  MINK.  It  would  be  worth  from  50  to  55,  subject  to  the  mortgage 
of  $75,000,000  at  4  per  cent. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  387 

Senator  WOLCOTT.  Then  a  2  per  cent  bond  subject  to  that  mortgage 
would  be  worth  about  35  ? 

Mr.  MINK.  I  think  not  far  from  that;  but  of  course  this  is  specula- 
tion, pure  and  simple. 

Senator  WOLCOTT.  Then,  as  a  matter  of  fact,  looking  to  market  value 
(which  is  the  way  for  business  men  to  look  at  it),  they  are  asking  the 
Government  to  settle  for  the  principal  of  its  debt,  and  to  settle  its 
interest  claim  at  about  35  cents  on  the  dollar.  In  other  words,  you  are 
offering  the  Government  the  principal  of  its  claim  and  35  per  cent  of 
its  interest? 

Mr.  MINK.  I  think  they  are  not  offering  so  much  as  that.  As  I 
understood  the  offer,  it  would  resolve  itself  into  something  like  this — I 
may  be  wrong :  The  reorganized  company  would  be  required  to  pay  the 
difference  between  the  $15,000,000  in  the  sinking  fund  and  the  $33,000,000 
of  the  debt,  or  $18,000,000.  The  value  of  the  2  per  cent  bond  would 
be  about  $14,000,000,  and  the  two  together  would  figure  up  about 
$32,000,000. 

Senator  WOLCOTT.  What  is  the  present  principal  of  the  debt? 

Mr.  MINK.  Thirty- three  million  dollars. 

Senator  BRICE.  Eighteen  million  dollars  for  principal  and  $40,000,000 
for  interest  would  make  $58,000,000.  I  understood  you  to  say  that  the 
debtAvas  $52,000,000? 

Mr.  MINK.  That  is  quite  true.  I  did  say  that  the  debt  was  $52,000,000 
after  deducting  the  sinking  fund.  I  think  I  was  in  error  in  saying 
that,  since  I  included  in  the  deductions  an  item  of  something  like 
$2,000,000  of  premium  paid  on  the  bonds  held  in  the  sinking  fund,  and 
which  I  suppose  should  not  be  deducted. 

Senator  BEIGE.  Give  the  amount  of  the  Government  debt  as  nearly 
as  you  can  estimate  it,  and  have  it  put  in  your  testimony,  because  these 
figures  vary  as  presented  by  different  witnesses,  and  you  can  make  an 
accurate  statement  and  send  it  to  the  committee. 

Mr.  MINK.  I  will. 

Senator  STEWART.  If  there  was  a  provision  to  pay  annual  install- 
ments on  the  principal  of  the  $40,000,000  of  bonds  sufficient  to  liquidate 
the  amount  at  the  end  of  fifty  years,  what  would  then  be  the  difference 
in  the  value  of  these  bonds,  and  how  would  that  affect  the  value  of  the 
security  ? 

Mr.  MINK.  It  would  affect  the  value  of  the  bonds  very  noticeably. 

Senator  STEWART.  You  put  the  value  now-  at  35.  How  would  you 
put  it  if  there  was  a  provision  of  this  kind? 

Mr.  MINK.  It  is  difficult  to  say.  The  bonds  might  be  worth,  in  that 
event — supposing  they  were  to  be  sunk  entirely  within  fifty  years — from 
50  to  55. 

Senator  WOLCOTT.  As  a  matter  of  fact,  the  Government  would  never 
have  a  foreclosable  interest  on  this  second  mortgage,  would  it? 

Mr.  MINK.  I  can  not  answer  that  question,  because  it  involves  a  legal 
proposition. 

Senator  WOLCOTT.  The  Government  would  have  an  interest  that 
would  be  subject  to  $75,000,000  in  cash.  Practically  it  is  like  taking 
the  note  of  the  reorganized  company,  which  would  first  have  $75,000,000 
to  pay,  and  of  course  nobody  would  seriously  contend  that  the  Gov- 
ernment, having  once  settled  its  claim,  would  ever  again  put  its  hands 
in  its  pocket  and  pay  out  $75,000,000  in  cash. 

Mr.  MINK.  And  it  was  because  not  only  of  this  consideration,  but 
because  of  other  considerations  that  suggest  themselves  to  me,  that  I 
have  formed  the  opinion  that  the  best  way  to  handle  the  matter  would 


388  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

be  to  intrust  it  to  commissioners  and  to  let  them  meet  all  the  other 
creditors  and  negotiate. 

Senator  WGLCOTT.  You  mean  commissioners  appointed  by  Con- 
gress ? 

Mr.  MINK.  Yes;  if  Congress  would  give  them  the  power. 

Senator  WOLCOTT.  Do  you  not  think  that  it  would  be  a  fairer  propo- 
sition for  the  Government  if  the  company  was  to  secure  the  Govern- 
ment by  a  first  lien  on  its  property — make  the  Government  a  sharer  in 
the  general  first  lien? 

Mr.  MINK.  It  seems  to  me  that  that  is  possible.  I  have  always  sup- 
posed that  the  fund  reserved  in  this  reorganization  scheme  was  to  be 
reserved  with  that  object  in  view. 

Senator  WOLCOTT.  Do  you  not  think  that  a  proper  reorganization 
scheme  ought  to  contemplate  a  cash  payment,  so  that,  with  the  sinking 
fund,  the  principal  of  the  Government  debt  should  be  paid,  and  that, 
as  to  the  interest,  the  Government  should  have  some  security  that  it 
could  share  with  the  first-mortgage  bondholders? 

Mr.  MINK.  If  they  could  bring  that  about  and  bring  the  debt  within 
$100,000,000,  it  would  be  a  very  desirable  settlement;  but  whether  you 
could  induce  the  other  bondholders  to  scale  their  obligations,  having 
superior  liens,  could  only  be  determined  by  negotiation. 

Senator  WOLCOTT.  What  proportion  of  the  security  holders  of  the 
Union  Pacific  Railway  Company  are  in  sympathy  with  this  reorganiza- 
tion plan  1 

Mr.  MINK.  I  understand  the  bulk  of  them;  I  have  an  impression  that 
70  per  cent  of  them  favor  it. 

Senator  WOLCOTT.  Including  the  stockholders? 

Mr.  MINK.  No ;  only  the  mortgage  bondholders.  The  percentage  of 
the  stock  in  favor  of  the  reorganization  plan  is  very  much  higher,  over 
90  per  cent. 

Senator  WOLCOTT.  Do  you  not  think  that  some  scheme  could  be 
devised  whereby  something  should  be  paid  to  the  Government  in  cash 
on  the  accrued  interest,  and  whereby  the  Government  should  have  a 
first-mortgage  security  for  any  deferred  payment  due? 

Mr.  MINK.  That  would  be  proceeding  on  the  theory  that  the  Govern- 
ment lien  was  unquestionably  worth  its  face. 

Senator  WOLCOTT.  Not  necessarily,  if  you  give  the  Government  a 
lower  interest.  You  might  give  the  Government  a  security  not  bear- 
ing its  face  value. 

Mr.  MINK.  That  suggestion  might  be  adopted.  I  have  not  consid- 
ered it. 

Senator  WOLCOTT.  Do  you  favor  the  general  procedure  of  this  reor- 
ganization committee? 

Mr.  MINK.  I  have  been  on  friendly  terms  with  General  Fitzgerald 
and  the  other  members  of  the  committee,  and  I  have  not  hesitated  to 
speak  to  them  about  details,  but  I  have  not  charged  myself  in  any 
formal  way  with  any  opinion  for  which  I  would  be  responsible. 

Senator  WOLCOTT  (referring  to  the  paper  presented  by  Mr.  Mink, 
giving  a  statement  of  the  financial  operations  of  the  receivers).  Under 
this  heading  of  "Other  expenditures,  $1,513,065,"  what  items  generally 
are  chargeable  to  it? 

Mr.  MINK.  We  have  charged  off  there  some  judgments  and  defici- 
encies due  to  the  operation  of  one  or  two  small  and  unimportant  lines 
which  were  not  in  our  hands  as  receivers,  but  which,  under  the  court's 
order,  we  have  been  charged  with.  We  have  also  charged  $134,000  for 
deficiencies  which  arose  from  the  operation  of  what  are  known  as  crip- 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  389 

pled  lines,  lines  which  do  not  pay  operating  expenses,  but  which  con- 
tribute advantages  to  the  Union  Pacific  which  are  sufficiently  important 
to  justify  the  assumption  of  these  properties.  We  have  also  included 
in  this  the  proportion  of  the  equipment  trust  obligations,  which  have 
been  paid  under  the  court's  orders.  These  are  all  the  items  which  I  can 
enumerate  here  now.  They  are  all  (except  the  unimportant  items  relat- 
ng  to  the  operation  of  crippled  lines)  items  which  would  be  neces- 
arily  charged  against  revenue. 

Senator  WOLCOTT.  They  do  not  include  any  extraordinary  expenses. 
I  suppose? 

Mr.  MINK.  They  do  not  include  extraordinary  expenses,  since  all  of 
the  expenses  charged  against  the  revenue  of  the  road  are  under  the 
head  of  operating  expenses. 

Senator  WOLCOTT.  Since  the  appointment  of  the  receivers,  do  you 
pay  rebates? 

Mr.  MINK.  Not  with  the  knowledge  and  consent  of  the  receivers. 

Senator  WOLCOTT.  Are  you  of  opinion  that  no  rebates  have  been  paid 
since  the  appointment  of  the  receivers? 

Mr.  MINK.  If  there  have  been,  they  have  been  paid  without  our 
knowledge  and  consent. 

Senator  WOLCOTT.  And  you  are  of  the  impression  that  none  have 
been  paid? 

Mr.  MINK.  That,  I  know,  is  the  specific  order  of  the  receivers. 

Senator  WOLCOTT.  Are  you  of  opinion  that  none  have  been  paid? 

Mr.  MINK.  I  must  entertain  that  opinion. 

Senator  WOLCOTT.  Do  you? 

Mr.  MINK.  I  do. 

Senator  WOLCOTT.  Does  your  road  expend  any  money  in  politics 
since  the  appointment  of  the  receivers? 

Mr.  MINK.  Not  a  penny,  so  far  as  I  know. 

Senator  WOLCOTT.  There  is  no  authorization  on  the  part  of  anybody 
connected  with  the  road  to  mix  with  political  matters? 

Mr.  MINK.  Absolutely  none. 

Senator  WOLCOTT.  Your  superintendents  are  not  authorized  to  spend 
any  of  the  company's  money  in  political  matters,  are  they? 

Mr.  MINK.  No. 

Senator  WOLCOTT.  Your  superintendent  at  Denver,  Mr.  Deuel?is  he 
authorized  to  spend  money  in  political  matters? 

Mr.  MINK.  No,  sir. 

Senator  WOLCOTT.  Would  you  be  apt  to  know  it  if  he  did? 

Mr.  MINK.  I  would  be  apt  to  hear  it 5  but  I  do  not  know  of  any  such 
expenses  and  I  believe  there  are  none.  That  is  my  firm  and  honest 
conviction. 

.  Senator  STEWART.  You  have  stated  that  the  combination  of  the  two 
roads — the  Union  Pacific  and  the  Central  Pacific — would  make  a  strong 
combination.  How  would  that  combination  aft'ect  the  other  roads? 
Would  it  tend  to  a  monopoly?  Would  the  other  roads  be  opposed  to  it? 

Mr.  MINK.  You  mean  the  other  transcontinental  lines? 

Senator  STEWART.  Yes,  and  those  on  this  side  which  run  part  of  the 
way  and  have  connection,  more  or  less,  across  the  continent.  How 
would  they  regard  the  combination? 

Mr.  MINK.  I  should  suppose  that  they  would  regard  such  a  combina- 
tion with  disfavor,  because  my  judgment  is  that  that  would  make  a  line 
of  very  great  strength.  The  geographical  position  of  the  Union  Pacific 
and  the  Central  Pacific  is  a  very  strong  one.  It  is  the  natural  direct 
line  across  the  continent.  It  is  the  line  which,  under  normal  conditions, 


390  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

would  carry  the  passengers;  and  it  seems  as  if  the  traffic  followed  the 
movement  of  passengers.  I  think,  therefore,  that  other  lines  would  look 
with  disfavor  on  such  a  combination.  The  Union  Pacific  and  the  Central 
Pacific  would,  in  my  judgment,  be  a  very  strong  line. 

Senator  STEWART.  How  would  it  affect  the  business  of  the  country, 
favorably  or  unfavorably? 

Mr.  MINK.  I  should  say  that  it  would  affect  the  business  of  the  coun- 
try favorably.  My  belief  is  that  a  strong  railroad  line  always  affects 
favorably  the  country  adjacent  to  it.  My  impression  is  that  the  strong 
communities  are  generally  along  those  lines  which  are  prosperous;  but 
whether  the  one  is  the  cause  and  the  other  the  effect  I  am  not  able 
to  say. 

Senator  STEWART.  Do  you  think  that  such  a  combination  of  the  two 
roads  would  have  the  effect  of  preventing  competition,  or  would  it 
increase  competition  ? 

Mr.  MINK.  It  would  probably  have  the  effect  of  stimulating  and 
increasing  competition. 

Senator  STEWART.  If  these  lines  were  joined  together  clear  across 
the  continent,  would  they  be  likely  to  let  other  railroad  lines  in  on  equal 
terms? 

Mr.  MINK.  I  should  say  not.  If  you  mean  to  ask  whether  they  would 
open  up  junction  points,  I  should  say  that  they  would  prevent  it  as  far 
as  possible. 

Senator  STEWART.  Would  it  not  be  desirable  for  the  community  that 
other  roads  should  have  equal  terms  at  junction  points? 

Mr.  MINK.  Of  course  I  do  not  mean  that  the  junction  points  would 
be  closed,  except  as  to  competitive  traffic.  I  think  that  it  is  an  almost 
invariable  rule  to  close  the  gateways  against  competitors. 

Senator  WOLCOTT.  You  are  not  referring  to  the  physical  exchange 
of  business;  you  are  referring  to  the  rating  of  business  and  to  the 
exchange  of  traffic? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  In  other  words,  every  railroad,  very  properly, 
carries  its  freight  to  the  greatest  possible  distance  along  its  own  lines? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  That  is  natural  and  legitimate,  is  it  not? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT.  Then  you  had  no  reference  to  the  question  of  the 
physical  connection  of  lines? 

Mr.  MINK.  No.  The  physical  connection  would  be  made,  and  there 
must  be  such  physical  connections;  but  none  of  the  competitive  traffic 
would  be  interchanged. 

Senator  WOLCOTT.  About  the  agreement  between  the  Union  Pacific 
and  the  Chicago  and  Northwestern ;  will  you  furnish  the  committee  with 
a  copy  of  it? 

Mr.  MINK.  I  will  do  so. 

Senator  WOLCOTT.  I  would  like,  when  you.  furnish  other  statements, 
to  have  you  show,  also,  the  market  price  of  the  obligations  of  the  Union 
Pacific  liailway  Company,  secured  on  Government  aided  portions  of 
the  lines,  which  are  subject  to  the  Government  mortgage,  and  also  the 
market  value  of  the  stock,  figuring  the  proportional  amount  of  stock 
which  should  apply  to  1,400  miles  out  of  the  1,825  miles.  In  other 
words,  I  want  to  show  the  present  public  estimate  of  the  equities  of  the 
Union  Pacific. 

Mr.  MINK.  I  understand  your  question,  but  it  is  a  very  difficult  one 
to  answer.  I  will  make  the  best  attempt  to  answer  it  I  can. 


GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  391 

Senator  WOLCOTT.  If  the  question  becomes  too  difficult,  you  need 
not  answer  it;  but  if  you  can  reasonably  do  so,  I  wish  you  would,  so 
that  the  Senate  can  see  what  the  general  public  thinks  of  this  property. 

Mr.  MINK.  Take  the  Government  lien  of  the  United  States  in  so  far 
as  it  covers  the  equipment.  Originally,  the  United  States  subsidy 
bonds  were  issued  on  certificates  made  by  a  Commissioner  appointed  in 
pursuance  of  the  act  of  Congress.  The  certificates  related  to  specific 
property,  including  equipment.  The  bonds  were  issued  upon  these 
certificates,  and  thereupon  they  became  a  lien  upon  the  property  enu- 
merated in  the  certificates,  and  consequently  against  the  equipment.  I 
understand  it  to  be  a  doctrine,  very  generally  entertained  and  accepted, 
that  if  an  instrument  is  silent  in  regard  to  this  matter  the  afterwards 
acquired  rights  do  not  run.  There  is  no  reservation  or  provision  in 
the  act  of  Congress  respecting  any  after- acquired  property  of  the  Union 
Pacific.  "  The  lien  runs  against  the  property,"  to  use  the  language  of 
the  Supreme  Court, "  for  and  on  account  of  which  it  was  issued."  The 
extent,  in  a  lineal  direction,  of  the  line  has  been  passed  on  by  the 
Supreme  Court,  and  the  extent  is  only  to  the  three  hundred  and  ninety- 
third  milepost.  The  suggestion  in  my  mind  is  that,  having  been  passed 
on  in  a  lineal  direction,  it  would  not  reach  in  any  other  direction  to  the 
property  described  in  the  certificate. 

The  CHAIRMAN.  It  did  not  have  the  words  "  on  all  property  acquired 
hereafter?" 

Mr.  MINK.  It  did  not.  I  believe  that  to  be  a  fair  proposition,  and  I 
know  it  is  the  proposition  resting  on  the  minds  of  the  junior  lien- 
holders. 

THE  UNION  PACIFIC. 

The  following  communication  and  exhibits  were  received  from  Mr. 
Oliver  W.  Mink  and  were  made  part  of  his  testimony : 

THE  UNION  PACIFIC  SYSTEM, 

New  York,  March  21,  1896. 

DEAR  SIR  :  Eeferring  to  the  questions  asked  me  on  the  13th  relating 
to  the  revenues  derived  from  the  operations  of  the  properties  owned  by 
the  Union  Pacfic  Eailway  Company  during  the  receivership  and  the 
extent  to  which  they  have  been  applied  in  payment  of  interest,  I  beg 
now  to  submit  the  following  statement: 

On  October  13,  1893,  the  properties  of  the  Union  Pacific  Railway 
Company  were  placed  in  the  hands  of  Messrs.  S.  H.  H.  Clark,  Oliver 
W.  Mink,  and  E.  Ellery  Anderson  as  receivers  under  what  is  known  as 
a  preservative  bill.  Almost  immediately  thereafter  the  Attorney-Gen- 
eral filed  in  the  proceeding  a  bill  of  intervention,  from  which  I  quote 
the  following  paragraph : 

And  the  Attorney-General  of  the  United  States  further  gives  the  court  to  under- 
stand and  be  informed  that,  in  his  opinion,  the  protection  of  the  interests  of  the 
United  States  and  of  all  other  creditors  of  the  Union  Pacific  Railway  Company 
requires  an  increase  in  the  number  of  receivers  as  hereinafter  suggested ;  that  the 
number  of  receivers  is  not  sufficient  for  the  performance  of  the  grave  and  serious 
duties  imposed  upon  them,  and  will  not  inspire  that  public  confidence  that  a  larger 
number  would  secure;  that  the  lien  of  the  United  States  is  by  far  the  largest  held 
by  any  single  person  or  corporation,  and  calls  for  the  protection  of  impartial  receiv- 
ers selected  for  that  purpose,  and  their  association  with  the  receivers  who  have  been 
nominated  to  and  appointed  by  this  court  upon  the  nomination  of  the  said  parties 
complainant,  and  whose  views  and  interests  (except  of  said  Anderson)  are,  as  the 
Attorney-General  is  informed  and  believes,  in  unison  with  those  of  the  complainants. 


392  GOVERNMENT    DEBT    OP   THE    PACIFIC    RAILROADS. 

The  prayer  in  said  bill  was  as  follows : 

Wherefore,  and  to  the  end  that  the  said  property  may,  pending  the  foreclosure 
and  sale  o:  reorganization,  bo  managed  to  the  best  interests  of  the  United  States  of 
America  as  well  as  of  other  creditors  and  stockholders,  and  to  the  end  tbat  the  best 
advice  and  judgment  accessible  to  the  court  may  not  only  be  had  in  its  operation, 
bnt  as  to  the  continuance  of  existing  contracts,  which  by  reason  of  the  said  receiver- 
ship may  require  for  their  enforcement  judicial  aid,  and  as  to  the  true  principles  ;m<l 
methods  of  reorganization  and  for  the  protection  of  all  interests  in  the  property, 
the  said  Attorney-General  for  the  United  States  respectfully  requests  the  said  court 
to  permit  the  United  States  to  defend  herein  and  to  appoint  two  receivers,  in  addi- 
tion to,  but  with  equal  powers  to  those  already  heretofore  appointed,  who  shall 
assist  the  three  receivers  now  in  office  in  performing  their  grave  and  responsible 
duties,  and  the  Attorney-General  prays  for  such  other  and  further  relief  as  under  the 
foregoing  facts  and  circumstances  the  United  States  may  be  entitled  to. 

On  this  bill  of  intervention  Messrs.  John  W.  Doane,  of  Chicago,  and 
Frederic  R.  Coudert,  of  New  York  City,  were  appointed  additional 
receivers  on  November  13, 1893. 

The  proceeding  under  which  the  receivers  were  thus  appointed  cov- 
ered all  the  properties  of  the  Union  Pacific  Eailway  Company,  and  is 
generally  referred  to  as  the  Ames  cause. 

The  preservation  of  the  system  as  a  whole  having  been  one  of  the  pur- 
poses, if  not  the  main  purpose,  of  the  proceeding,  the  receivers  applied, 
under  proper  directions  of  the  court,  a  part  of  the  moneys  coining  into 
their  hands  to  the  payment  of  obligations  secured  by  pledges  of  collat- 
eral, which  pledges  were  believed  to  largely  exceed  in  value  the  obliga- 
tions running  against  them.  Moreover,  the  security  for  such  obligations 
represents  the  control  of  many  of  the  corporations  the  lines  or  prop- 
erties owned  by  which  had  been  placed  in  the  hands  of  the  receivers 
under  the  general  or  preservative  receivership  proceeding.  Notwith- 
standing these  considerations,  however,  the  financial  and  industrial 
depression  became  so  widespread  and  pronounced  that  the  receivers 
soon  felt  called  upon  to  no  longer  recommend  the  court  to  authorize 
such  payments,  and  no  such  payments  were  made  after  September,  1894. 
At  or  about  the  same  time  this  general  policy  was  further  complicated 
by  the  action  of  the  trustees  under  the  consolidated  mortgage  of  the 
Kansas  Pacific  Kailway  Company,  who  filed,  on  July  10, 1894,  a  bill  for 
the  foreclosure  of  that  mortgage. 

The  receivership  thus  established  (that  is,  the  Ames  receivership) 
continued  without  break  until  July  16,  1894,  when  the  bill  above  men- 
tioned to  foreclose  the  consolidated  mortgage  on  the  Kansas  Pacific 
line  (and  which  covered  all  the  lines  from  Kansas  City  and  Leaven- 
worth  on  the  east  to  Denver  on  the  west)  was  filed.  Thereafter  the 
Ames  receivership  extended  without  break  (excluding,  of  course, 
the  road  covered  by  the  Kansas  Pacific  consolidated  mortgage)  to 
August  1,  1894,  when,  on  an  intervening  petition  of  the  trustees  of  the 
Omaha  Bridge  mortgage,  the  property  covered  by  that  mortgage  was 
practically  separated  from  the  rest  of  the  property  included  in  the 
Ames  receivership.  Thereafter  the  Ames  receivership,  as  thus  reduced, 
continued  without  further  break  until  November  19,  1894,  when  the 
Denver  Pacific  mortgage  was  brought  into  court  under  a  suit  of  fore- 
closure, whereupon  the  subdivision  which  it  covered  passed  from  the 
control  of  the  Ames  receivership.  Thereafter  there  remained  in  the 
Ames  receivership  only  the  main  line  of  the  Union  Pacific,  extending 
from  Omaha  to  a  point  5  miles  west  of  Ogden,  the  administration  of 
which  thus  remained  in  the  Ames  receivers  until  January  21,  1895, 
when  a  bill  to  foreclose  the  mortgage  covering  that  division  was  filed, 
whereupon  it  passed  from  the  possession  of  the  receivers  in  the  Ames 
cause. 


GOVERNMENT  DEBT   OF   THE   PACIFIC   RAILROADS.          393 

On  this  last-named  date,  January  21, 1895,  therefore,  all  of  the  vari- 
ous subdivisions  of  the  Union  Pacific  Eailway  had  been  taken  out  of 
the  Ames  receivership  and  been  passed  over  to  the  receivers  named  in 
the  orders  entered  in  the  various  foreclosure  suits.  In  each  of  such 
foreclosure  suits  the  courts  have  named  the  receivers  who  were  named 
in  the  original  or  Ames  cause. 

Independently  of  the  proceedings  instituted  on  July  1G,  1894,  by  the 
trustees  under  the  Kansas  Pacific  consolidated  mortgage  the  trustees 
under  the  following  mortgages,  which  are  secured  by  liens  on  the  Kan- 
sas Pacific  line  prior  to  the  lien  of  the  consolidated  mortgage,  have 
instituted  the  following  j)roceedings: 

April  15, 1895,  suit  to  foreclose  the  Middle  Division  first  mortgage. 

July  29,  1895,  intervening  petition  seeking  the  payment  of  certain 
interest  on  the  Denver  Extension  mortgage  bonds. 

August  5,  1895,  suit  to  foreclose  the  Kansas  Division  and  collateral 
mortgage  (a  mortgage  subordinate  to  all  other  mortgages  resting  on 
the  Kansas  and  Denver  Pacific  divisions). 

November  21,  1895,  suit  to  foreclose  the  Eastern  Division  first 
mortgage. 

The  complications  which  have  resulted  from  these  various  proceed- 
ings, particularly  in  so  far  as  they  relate  to  the  mortgage  subdivisions 
of  the  Kansas  Pacific  line,  were  so  involved  that  the  receivers  filed,  on 
December  14,  1895,  a  petition  setting  forth  to  the  court  such  facts  and 
circumstances  as  in  their  judgment  would  bring  about  their  reasonable 
solution,  a  hearing  under  which  has  recently  been  completed  at  Omaha, 
and  the  matter  now  stands  submitted  to  the  special  master  in  chancery 
for  his  report.  Until  a  report  shall  have  been  made  and  approved  by 
the  court  no  allotment  of  the  revenues  derived  from  the  operation  of 
the  several  Kansas  Pacific  mortgage  subdivisions,  in  respect  of  which 
foreclosure  suits  or  intervening  petitions  are  pending,  can  well  be 
made.  Meanwhile  the  operations  of  the  entire  Kansas  Division  from 
July  17, 1894,  to  this  date  have  been  included  in  a  separate  account, 
the  balance  of  which  is  subject  to  such  distribution  as  the  court  shall 
order  upon  the  petition  now  in  the  hands  of  the  special  master.  I 
inclose  with  this  a  copy  of  the  receivers'  petition  thus  referred  to. 

I  also  inclose  the  following  exhibits: 

EXHIBIT  A. — Statement  of  the  financial  operations  of  the  Ames 
receivership  of  the  Union  Pacific  Eailway  from  October  13,  1893,  to 
December  31,  1895,  inclusive,  apportioned  to  the  three  grand  divisions, 
namely,  the  Union  Division  or  Main  Line,  the  Kansas  Division  (includ- 
ing the  Leavenworth  Branch),  and  the  Denver  Pacific  or  Cheyenne 
Branch,  though  it  should  be  understood  that  the  property  of  the  Union 
Pacific  Eailway  Company,  having  been  placed  in  the  hands  of  the 
receivers  as  a  whole,  the  rights  of  the  different  subdivisions,  or  the 
mortgagees  thereof,  prior  to  their  appearance  in  court,  remain  to  be 
determined.  The  apportionment  ought,  therefore,  to  be  looked  upon 
as  more  or  less  suggestive.  The  statement  does  not  include  the  opera- 
tions of  any  of  the  mortgaged  subdivisions  after  bills  in  foreclosure 
were  filed  in  respect  thereof. 

As  I  was  questioned  respecting  the  payments  made  on  account  of 
the  so-called  collateral  trust  obligations,  I  may  say  in  passing  that  our 
payments  for  interest  on  such  obligations  were  as  follows: 

Collateral  trust  6  per  cent  bonds $110, 160 

Collateral  trust  5  per  cent  bonds 116,925 

Collateral  trust  6  per  cent  notes 668,  835 


394  GOVERNMENT   DEBT    OF    THE   PACIFIC    RAILROADS. 

Against  these  payments  it  may  be  well  to  note  that  the  income 
derived  from  investments,  a  part  of  which  is  pledged  for  such  collat- 
eral obligations,  amounted  to  $740,944.52.  None  of  these  investments 
is  bound  by  the  lien  of  any  of  the  above-mentioned  mortgages  which 
are  in  foreclosure,  and  no  part  of  the  income  derived  from  these  invest- 
ments could  be  claimed  by  the  receivers  in  the  respective  foreclosure 
suits  as  properly  applicable  to  the  payment  of  the  interest  accruing  on 
these  mortgages. 

EXHIBIT  B. — Statement  in  detail  of  the  item  appearing  in  Exhibit  A 
entitled  "Income  from  investments." 

EXHIBIT  0.— Statement  in  detail  of  the  item  in  Exhibit  A  entitled 
"Deficit  of  crippled  lines." 

EXHIBIT  D. — Statement  of  the  financial  operations  of  the  Kansas 
Pacific  consolidated  mortgage  property  for  the  period  from  July  17, 1894, 
theday  following  the  date  on  which  the  bill  to  foreclose  that  mortgage  was 
filed,to  December  31,1895,  the  balance  at  thecredit  of  which  ($550,916.45) 
is  subject  to  such  deductions  as  may  be  made  by  the  court  in  favor  of 
the  Middle  Division  mortgagees,  the  Kansas  Pacific  Denver  Extension 
mortgagees,  the  Kansas  Division  and  collateral  mortgagees,  and  the 
Kansas  Pacific  Eastern  Division  mortgagees  when  passing  on  the 
receivers'  petition  of  December  14, 1895. 

The  overdue  obligations  on  account  of  bonds  secured  by  mortgages 
resting  on  the  Kansas  Division  are  as  follows: 

Consolidated  mortgage: 

May  1,  1894,  coupons $351,600 

November  1, 1894,  coupons 351,600 

May  1,  1895,  coupons 351,600 

November  1,  1895,  coupons 351,600 

Middle  Division  mortgage : 

June  1,  1894,  coupons 121,  890 

December  1,  1894,  coupons 121,890 

June  1,  1895,  coupons 121, 890 

December  1,  1895,  coupons 121,  890 

Denver  Extension  mortgage : 

May  1,  1894,  coupons 176,610 

November  1, 1894,  coupons 176,610 

May  1,1895,  coupons 176,610 

November  1, 1895,  coupons 176,610 

Eastern  Division  mortgage : 

August  1, 1894,  coupons 67,200 

February  1, 1895,  coupons 67,200 

August  1, 1895,  coupons 67,200 

August  1, 1895,  principal 2,  240, 000 

February  1, 1896,  interest 67,200 

Total 5,109,200 

I  do  not  include  the  claims  of  the  Kansas  Division  and  collateral 
mortgagees,  since  their  rank  is  not  such  as  to  make  it  a  factor  of  conse- 
quence now,  nor  do  I  include  the  claims  of  the  Leavenworth  Branch 
and  income  bondholders,  since  the  amounts  involved  are  inconsiderable. 
EXHIBIT  E. — Statement  of  the  financial  operations  of  the  receivers 
in  respect  of  the  Omaha  Bridge  Division. 

The  overdue  obligations  of  bonds  secured  by  mortgages  resting  on 
that  division  are  as  follows : 
First  mortgage : 

April  1,  1894,  principal „ $122,000 

April  1,  1895,  principal 192,000 

Renewal  mortgage : 

October  1,  1893,  coupons 11,675 

April  1,  1895,  coupons 26,  100 

October  1,  1895,  coupons 26,400 

Total 378,475 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  395 

EXHIBIT  F. — Statement  of  the  financial  operations  of  the  Denver 
Pacific  or  Cheyenne  Branch  mortgage  receivership  for  the  period  from 
November  20, 1894,  the  day  following  that  on  which  the  bill  to  foreclose 
that  mortgage  was  filed,  to  December  31, 1895,  the  balance  at  the  credit 
of  which  is  $194,620.92. 

It  is  difficult  to  state  the  amount  of  overdue  interest  on  the  Denver 
Pacific  or  Cheyenne  Branch  bonds,  as  controversies  are  likely  to  arise 
respecting  a  large  amount  of  such  overdue  interest.  The  amount  of 
Denver  Pacific  bonds  now  outstanding  is  $975,000.  Of  these  the  trus- 
tees under  the  Kansas  Pacific  consolidated  mortgage  hold  all  but  $4,000. 
As  the  interest  on  the  consolidated  mortgage  bonds  has  been  paid  to 
November  1,  1893,  it  may  be  that  the  trustees  under  that  mortgage 
will  claim  that  the  interest  due  on  the  Denver  Pacific  bonds  which  has 
matured  since  that  day  should  be  paid  to  them.  The  amount  of  such 
Denver  Pacific  coupons  is  as  follows : 

May  1,1894..  $34,125 

November  1, 1894 34,125 

May  1,  1895 34,125 

November  1, 1895 34,125 

Total 136,500 

EXHIBIT  G-. — Statement  of  the  financial  operations  of  the  Union 
Pacific  Main  Line  mortgage  receivership  from  January  22,  1895,  the 
day  following  that  on  which  the  bill  to  foreclose  that  mortgage  was 
filed,  to  December  31, 1895.  The  balance  at  the  credit  of  that  division, 
as  shown  by  the  statement,  $2,039,658.82,  has  been  reduced  by  the  pay- 
ment begun  to  be  made  on  January  20  last  of  the  January  1, 1895, 
coupon,  and  interest  thereon,  $51,735.10,  amounting  in  all  to  $868,605.10. 
A  petition  is  now  pending  in  which  the  trustees  seek  an  order  directing 
the  receivers  to  pay  the  July,  1895,  coupon,  $816,870.  An  installment 
of  the  principal  of  this  debt,  amounting  to  $6,475,000,  became  due  on 
January  1,  1896,  and  there  are  also  overdue  the  coupons  which  matured 
on  the  same  day,  $816,870. 

I  ought,  perhaps,  to  call  the  committee's  attention  to  the  fact  that 
during  the  entire  period  of  the  receivership  the  United  States  has 
retained  against  the  various  receiverships  the  sums  which,  by  the  acts 
of  1862,  1864,  and  1878,  it  claimed  the  right  to  retain  as  against  the 
corporation.  The  sums  thus  retained  are  shown  in  the  various  exhibits, 
and  are  as  follows : 

Ames  receivership $1, 523,  868. 30 

Kansas  Pacific  consolidated  mortgage  receivership 199,  778. 81 

Omaha  Bridge  receivership 3, 425. 62 

Denver  Pacific  or  Cheyenne  Branch  receivership 6,340.24 

Dexter-Ames  or  main  line  mortgage  receivership 1,  038, 881. 89 

Total 2,772,294.86 

The  balances  standing  at  the  credit  of  the  various  receiverships,  as 
shown  on  the  inclosed  statements,  are  as  follows: 

Amos  receivership $703,031.37 

Kansas  Pacific  consolidated  mortgage  receivership 556, 916. 45 

Omaha  Bridge  receivership 22,001.32 

Cheyenne  Branch  mortgage  receivership 194, 620.  92 

Des  ter- Ames  receivership $2, 039,  658.  82 

Less  the  J auuary  1,  1895,  interest  payment 868,  605. 10 

1, 171,  053. 72 

Total 2,647,623.78 


396  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

There  are  now  overdue  the  following  bonds  and  coupons  secured  by 
mortgages  having  liens  altogether  superior  to  that  of  the  United  States: 

Union  Pacific  Main  Line: 

Bonds  due  January  1,  1896 $6,475,000 

Coupons  due  July  1,1895 816,870 

Coupons  due  January  1,1896 ." 810,870 

Total  of  Union  Division  prior-lien  defaults 8, 108,  740 


Kansas  Pacific,  Eastern  Division: 

Coupons  due  August  1, 1894 67,200 

Coupons  due  February  1, 1895 67,  200 

Coupons  due  August  1, 1895 67,  200 

Bonds  due  August  1, 1895 2,  240,  000 

Interest  due  February  1,1896 * 67,200 

Kansas  Pacific,  Middle  Division: 

Coupons  due  June  1, 1894 121,81)0 

Coupons  due  December  1, 1894 121,890 

Coupons  due  June  1, 1895 121,  890 

Coupons  due  December  1, 1895 121,890 


Total  of  Kansas  Division  prior-lien  defaults 2,  996,  360 

Grand  total  of  defaults  secured  by  liens  altogether  prior  to  that  of 
the  United  States 11,105,500 

The  various  exhibits  which  are  inclosed  will  show  that  since  the 
appointment  of  the  receivers  in  October,  1893,  they  have  been  author- 
ized, in  the  Aines  cause,  to  pay  the  following  amounts  of  interest: 

Union  Division : 

Main  line  sixes $1,634,070 

Sinking  fund  eights 149,200 

Omaha  Bridge  eights 22,  600 

Union  Pacific  Railroad  Company  collateral  trust  6  per  cent  bonds 110, 160 

Kansas  Pacific: 

Eastern  Division  sixes 67,  200 

Middle  Division  sixes 121,  890 

Consolidated  sixes 351,  600 

Union  Pacific  Railway  Company  collateral  trust  5  per  cent  bonds 116,  925 

Omaha  Bridge  fives 52,800 

Union  Pacific  Railway  Company : 

Equipment  trust  fives 33,  475 

Collateral  trust  6  per  cent  notes 668,  835 

Kansas  Pacific  Denver  Extension  sixes 176,  610 


Total 3,505,365 

And  they  have  also  been  authorized  to  pay  in  the  main-line  fore- 
closure cause  the  interest  coupon  of  January  l,1895,with  interest  thereon, 
$808,605.10.  This  payment,  not  having  been  made  until  January  20, 
last,  is  not  included  in  the  inclosed  statements,  which  extend  only  to 
December  31,  1895. 

They  have  also  been  authorized  to  pay  in  the  foreclosure  causes  on 
account  of  the  equipment  trust  obligations  of  the  Union  Pacific  Rail- 
way Company  the  following  sums: 

For  principal  of  bonds $861,000.00 

For  coupons 133,  775. 00 

For  interest  on  delayed  payments 57,  939.  75 

Total 1,052,714.75 

Yours,  very  truly, 

OLIVER  W.  MINK, 

Hon.  JOHN  IT.  GEAR,  For  the  Receivers. 

Chairman  Senate  Committee  on  Pacific  Railroads, 

Washington,  D.  C. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


397 


EXHIBIT  A. 


RECEIVERS   UNION  PACIFIC  RAILWAY. 


Statement  of  the  financial  operations  of  the  "Ames  receivership"  from  October  13,  1893,  to 
December  31,  1895,  inclusive,  apportioned  to  the  various  divisions  of  the  Union  Pacific 
Hallway. 


Union  and 
Omaha  Bridge 
Divisions. 

Kansas 
Division  and 
Leavenworth 
Branch. 

Cheyenne 
Branch. 

Total. 

INCOME. 

Gross  earnings  

$14,  471,  680.  84 

$2,  109,  504.  11 

$691,  837.  27 

$17,273,022.22 

9,  603,  794.  98 
436,  427.  60 

10,  040,  222.  58 

1,  528,  141.  01 
170,  395.  97 

1,  698,  536.  98 

568,  654.  52 
22,  127.  36 

11,700,590.51 
628,  950.  93 

Taxes 

Operating  expenses  and  taxes  

590,781.88 

12,  329,  541.  44 

4,  431,  458.  26 
424,  042.  55 

410,967.13 
274,  594.  04 

220,  000.  00 
8,  910.  50 

3,  261.  28 
607.  26 

101,  055.  39 
42,  307.  93 

4,  943,  480.  78 
a  5740,944.52 

220,  000.  00 
a  24,  043.  45 

a  8,  800.  00 
a  1,638.  58 

Interest  on  Kansas  Pacific  consolidated 

Proceeds  of  Union  Depot  Co.,   Spokane 
Falls  note 

13,760.07 

5,  036.  24 
937.  76 

1,  372.  88 

502.  48 
93.56 

Proceeds  of  Pueblo  Union   Depot   and 

4,  875,  234.  88 

918,  340.  21 

145,  332.  24 

5  938,  907.  33 

CHARGES. 

2,  334.  96 

7,  247.  20 
5,  828.  68 
4,  568.  60 

839.  24 
82,  672.  94 

13,  760.  07 
1,  352,  483.  20 
1,  469,  734.  89 

1,  512.  04 

4,  693.  01 
3,  774.  44 
2,  958.  46 

2,  373.  57 
53,  535.  89 

8,  910.  50 
149,  648.  58 

232.  97 

723.  07 
581.  54 
455.  82 

18.27 
8,  248.  51 

1,  372.  88 
21,736.52 

a  4,  079.  97 

a  12,  663.28 
a  10,  184.  66 
a  7,  982.  88 

a  3,  231.  08 
a  b  144,  457.  34 

a  24,  043.  45 
1,  523,  868.  30 

Deficit,     Leavouworth,      Topeka,      and 
Southwestern  Kwy.  Co  

Commission  and  expenses  of  paying  con- 

Deficit  of  "  Cripple  lines  "                         .  . 

Union  Depot  Co.,  Spokane  Falls,  bonds 

United  States  earnings,  included  above  in 

Total  charges  to  this  point  
Balance  applicable  to  interest  on 

227,  406.  49 

33,  369.  58 

1,730,510.96 

3,405,499.99 

690,  933.  72 

111,  962.  66 

4,  208,  396.  37 

Interest  on  bonds  ordered  paid  by  the 
court: 

1,  634,  070.  00 
149,  200.  00 
22,  600.  00 
63,  044.  57 

1,  634,  070.  00 
149,  200.  00 
22,  600.  00 
a  110,  160.00 
67,  200.  00 
121,890.00 
351,000.00 
a  11  6,  925.  00 
52  800  00 

Sinking  fund  8s 

Omaha  Bridge  8s 

Collateral  trust  Cs  

40,  825.  30 
67  200  00 

6,  290.  13 

Eastern  Division  6s  

Middle  Division  6s                     ... 

121,890.00 
351,  600.  00 
43,  332.  40 

66,916.18. 
52,  800.  00 
19,  157.74 
382,  774.  27 

6,  676.  42 

Omaha  Brid  "'eSs  

12,  405.  83 
247,  870.  25 
176,  610.  00 

1,911.43 
38,  190.  48 

a  3;},  475.  00 
a  668,  835.  00 
176,  610.  00 

Collateral  trust  note  Gs  

Total  interest  ordered  paid       .... 

2,  090,  562.  76 

1,061,733.78 

53,068.46 

3,  505,  365.  00 

1,  014,  937.  23 

c  370,  800.  06 

58,  894.  20 

703,  031.  37 

a  Apportioned  to  the  various  divisions  on  a  road  milage  basis. 
6  For  detail  see  accompanying  statement, 
c  Deficit. 


OFFICE  OF  THE  RECEIVERS,  Boston.  March  11, 1896. 


ALEX.  MILLAR,  Assistant  Comptroller. 


398 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


EXHIBIT  B. 

RECEIVERS  UNION  PACIFIC  RAILWAY. 

Statement  of  income  from  investments  of  the  Union  Pacific  Kailiray,  consolidated,  front 
October  13,  1893,  to  December  31,  1805,  inclusive. 


Name  of  income. 


Amount. 


Atchison  Union  Depot  and  Railroad  Co.  coupons. 
Cheyenne  County  (Colo.)  judgment  coupons 


City  of  Wichita  (Kans.)  coupons  . 

Colorado  Central  R.  R.  Co.  coupons 

Echo  and  Park  City  Rwy.  Co.  coupons. 
Hotel  department  income 


Juucl ion  City  (Davis  County,  Kans.)  coupons 

Kansas  City,  AV vandotte  and  Northwestern  R.  R.  Co.  trust  receipts,  interest 

Kansas  City  and  Northwestern  11.  11.  Co.  coupons 

Leaven  worth  Depot  and  II.  11.  Co.  coupons 

Leaveuwortli  Depot  and  R.  R.  Co.  dividend 

Northern  Pacific  Terminal  Co.  coupons 

Occidental  and  Oriental  Steamship  Co.  dividend 

Oinalia  Hridgo  8  per  cent  coupons 

Omaha  Bridge  renewal  coupons 

Paci  (ic  Ex  press  Co.  dividends 

Pullman-Union  Pacilic  Association  cars,  three-fourths  of  net  earnings 

Union  Depot  Co.  (Kansas  City)  dividend 

Union  Depot  and  R.  R.  Co.  (Denver)  dividends 

Union  Depot  Co.,  of  Spokane  Falls,  coupons  and  interest 

Union  Pacific  Coal  Co.  coupons  and  registered  interest 

Union  Pacilic  collateral  trust  note  interest 

Utah  and  Northern  Rwy .  Co.  7  per  cent  coupons 


$112. 50 
3,  668. 00 
1,111.46 

70,  280. 00 

14, 400.  00 

3,112.06 

150.  00 

3,  660.  20 

2, 425. 00 

7,  875.  00 

1,  000.  00 

1,  GOO.  00 

25,  000.  00 

160.  00 

16, 100.  00 

72,  000. 00 

303, 738. 03 

7,  500. 00 

54,  000. 00 

14,  391.  67 

109, 775.  00 

21.  600. 00 

7, 385. 00 


Total  income  from  investments 740,944.52 


OFFICE  OF  THE  RECEIVERS,  Boston,  March  11,  1896. 


ALEX.  MILLAR,  Assistant  Comptroller. 


EXHIBIT  C. 


RECEIVERS   UNION  PACIFIC  RAILWAY. 


Detail  of  the  item  of  deficit  of  certain  "  cripple  lines"  from  October  13, 1893,  to  July  31, 
1894,  and  their  apportionment  to  the  various  divisions  of  the  Union  Pac  ific  Railway,  on 
a,  road  mileage  basis. 


Name  of  line. 

Union  divi- 
sion, including 
Omaha  Bridge. 

Kansas   divi- 
sion, including 
Leavenworth 
branch. 

Denver 
Pacific. 

Total  Union 
Pacific 
Railway  Com- 
pany. 

Union    Pacific,   Brighton   and    Boulder 

$3,254  55 

$2  107  53 

$324  71 

$5  686  79 

Junction  City  and  Fort  Kearney  Rwy  

24,  068.  32 
42  989  41 

15,  585.  74 
27  838  33 

2,  401.  36 
4  289  18 

42,  055.  42 
75  116  92 

Saliua  and  Southwestern  Rwy  

6,  640.  99 

4,  300.  45 

662  59 

11  604  03 

Kansas  City  and  Omaha  R.  R.,  18  per  cent 
of  $55,523.21,  deficit  from  Oct.  13,  1893, 
to  Dec  31  1894 

5,719  67 

3  703  84 

570  67 

9  994  18 

82  672  94 

53  535  89 

8  248  51 

144  457  34 

a  Including  only  operating  expenses  and  taxes,  less  amount  of  gross  earnings. 

OFFICE  OF  THE  RECEIVERS,  Boston,  March  11,  1896. 

ALEX.  MILLAR,  Assistant  Comptroller. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  399 

EXHIBIT  D. 

RECEIVERS   KANSAS  PACIFIC   CONSOLIDATED  MORTGAGE  PROPERTY. 

Statement  of  the  financial  operations  of  the  receivers  of  the  Kansas  Pacific  consolidated 
•mortgage property  daring  the  period  from  July  17, 1894,  to  December  31, 1895,  inclusive. 

Receipts : 

Earnings $4,235,206.93 

Expenses $2,817,514.91 

Taxes 304,242.93 

3, 121,  757.  84 

Surplus  earnings 1,113,449.09 

Expenditures : 

United  States  earnings,  included  above  in  gross  earnings  but  withheld.       199, 778. 81 
Union   Pacific  equipment  trust  obligations  paid  pursuant  to  court 

Order  No.  B  25 263,178.69 

Denver  Extension  land  expenses $206, 975. 21 

Less  prepayments 113,400.07 

93, 575. 14 

556,  532. 64 


Balance,  surplus 556, 916. 45 

OFFICE  OF  THE  RECEIVERS,  Boston,  March  11, 1896. 

ALEX.  MILLAR,  Assistant  Comptroller. 


EXHIBIT  E. 

RECEIVERS   UNION  PACIFIC   RAILWAY,  OMAHA  BRIDGE  DIVISION. 

Statement  of  the  financial  operations  of  the  receivers  of  the  Union  Pacific  Railway,  Omaha 
Bridge  Divisions,  during  the  period  from  An  gust  1, 1894,  to  December  31. 1895,  inclusive. 

Receipts: 

Earnings $488,454.94 

Expenses $270,708.32 

Taxes 32, 187.10 

302,895.42 


Surplus  earnings 185,559.52 

Expenditures : 

United  States  earnings,  included  above  in  gross  earnings  but  withheld. . .        3, 425.  62 
J.  Pierpont  Morgan  and  Edwin  F.  Atkins,  trustees  (court  order  No.  108) . .     160, 132. 58 

163,558.20 


Balance,  surplus 22, 001. 32 

OFFICE  OF  THE  EECEIVEES,  Boston,  March  11, 1896. 

ALEX.  MILLAB,  Assistant  Comptroller. 


EXHIBIT  F. 

CHEYENNE  BRANCH  MORTGAGE  RECEIVERSHIP. 

Statement  of  the  financial  operations  of  the  receivers  of  the  Cheyenne  Branch  mortgage 
during  the  period  from  November  20,  1894,  to  December  31,  1895,  inclusive. 

Keceipts : 

Earnings $830,924.59 

Expenses $549,770.20 

Taxes 27,557.49 

577,327.69 


Surplus  earnings 253,  i 

Expenditures: 

United  States  earnings,  included  above  in  gross  earnings,  but  withheld 6, 340. 24 

Union  Pacific  equipment  trust  obligations  paid  pursuant  to  court  order 

No.  A  15 52,635.74 

58,  975.  98 

Balance,  surplus 194,620.92 

OFFICE  OF  THE  RECEIVERS,  Boston,  March  11,  1896. 

ALEX.  MILLAE,  Assistant  Comptroller. 


400  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


EXHIBIT  G. 

DEXTER-AMES    RECEIVERSHIP. 

Statement  of  the  financial  operations  of  the  receivers  of  the  Union  Pacific  Eailway,  Union 
Division,  during  the  period  from  January  22  to  December  31,  1895,  inclusive. 

Receipts : 

Earnings $10,004,993.41 

Expenses $5,  840,  (i4».  21. 

Taxes 345,003.17 

6, 185,  652.  38 

Surplus  earnings 3,819,341.03 

Expenditures : 

Interest  ordered  paid  by  the  court 3,  900. 00 

United  States  earnings,  included  above  in  gross  earnings,  but  with- 
held   : 1, 038,  881. 89 

Union  Pacific  equipment  trust  obligations,  paid  pursuant  to  court 

order  No.  19 736,900.32 

1 , 779,  682. 21 


Balance,  surplus 2,039,658.82 

OFFICE  OF  THE  RECEIVERS,  Boston,  March  11, 1896. 

ALEX.  MILLAR,  Assistant  Comptroller. 


TESTIMONY  OF  MR.  S.  H,  H.  CLARK. 

Mr.  S.  H.  H.  CLARK,  sworn  and  examined. 

Senator  WOLCOTT.  How  many  years  have  you  been  connected  with 
the  Union  Pacific  Railway  Company1? 

Mr.  CLARK.  Since  June,  1867,  with  an  intermission  of  a  period 
between  October,  1884,  and  November,  1890. 

Senator  WOLCOTT.  During  which  time  you  were  with,  the  Missouri 
Pacific? 

Mr.  CLARK.  Yes. 

Senator  WOLCOTT.  You  are  now  one  of  the  receivers  of  the  Union 
Pacific? 

Mr.  CLARK.  I  am. 

Senator  WOLCOTT.  Mr.  Anderson  described  you  in  his  testimony  as 
the  " operating  receiver."  Is  this  your  title? 

Mr.  CLARK.  No;  I  think  not,  I  presume  he  used  it  simply  as  a  con- 
venient term. 

Senator  WOLCOTT.  You  have  charge  of  the  traffic  and  operation  of 
the  road  ? 

Mr.  CLARK.  Of  operation. 

Senator  WOLCOTT.  You  are  entirely  familiar  with  the  property  and 
its  branches  ? 

Mr.  CLARK.  To  a  great  degree,  yes.    I  ought  to  be  if  I  am  not. 

Senator  WOLCOTT.  Are  the  relations  of  the  Union  Pacific  to  the 
lines  with  which  it  connects  at  Council  Bluffs — the  Eock  Island,  the 
Wabash,  the  Burlington,  and  the  Northwestern — alike? 

Mr.  CLARK.  I  can  not  say  that  they  are  exactly  alike;  they  are 
friendly. 

Senator  WOLCOTT.  Have  you  special  arrangements  with  any  one  of 
these  lines ;  and  if  so,  what  are  they  ? 

Mr.  CLARK.  There  is  an  agreement  made  by  my  predecessor  with 
the  Chicago-Northwestern  Company  by  which  the  relations  between 
that  company  and  the  Union  Pacific  are  perhaps  more  harmonious  and 
probably  somewhat  more  advantageous  to  the  Union  Pacific  property 
than  exist  with  the  other  companies  connected  with  the  Union  Pacific. 


GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS.  401 

Senator  STEWART.  Do  you  speak  of  your  predecessor  as  receiver  or 
as  president  of  the  company? 

Mr.  CLARK.  My  predecessor  as  president,  Mr.  Charles  Francis 
Adams. 

Senator  WOLCOTT.  Are  these  relations  more  advantageous  to  the 
Chicago-Northwestern  Railroad  than  to  other  roads? 

Mr.  CLARK.  I  should  say  so,  to  a  certain  extent.  It  is  difficult  to 
determine  just  to  what  extent. 

Senator  WOLCOTT.  You  do  not  think  that  the  Chicago  and  North- 
western road  is  a  sufferer  by  the  agreement,  do  you? 

Mr.  CLARK.  No,  sir. 

Senator  WOLCOTT.  Did  you  renew  it  at  the  time  of  the  receivership? 

Mr.  CLARK.  It  was  not  renewed;  it  was  simply  allowed  to  stand,  by 
assent,  so  to  speak. 

Senator  WOLCOTT.  Are  you  familiar  with  this  plan  of  reorganization? 

Mr.  CLARK.  I  am  not. 

Senator  WOLCOTT.  You  have  looked  into  it,  more  or  less,  I  suppose? 

Mr.  CLARK.  Very  little. 

Senator  WOLCOTT.  I  notice  that  on  this  scheme  there  are  Mr.  Hewitt 
and  Mr.  Depew.  Have  those  gentlemen  been  heretofore  identified  with 
the  management  of  the  Union  Pacific  system. 

Mr.  CLARK.  Mr.  Hewitt  only,  and  only  as  a  director  of  the  company, 
so  far  as  I  know. 

Senator  WOLCOTT.  And  Mr.  Depew? 

Mr.  CLARK.  I  do  not  know  Mr.  Depew  at  all.  I  have  seen  him,  but 
I  have  never  met  him  i>ersonally. 

Senator  WOLCOTT.  You  know  of  no  connection  which  he  has  with 
the  Union  Pacific? 

Mr.  CLARK.  I  do  not. 

Senator  WOLCOTT.  Do  you  know  how  it  happens  that  these  two  gen- 
tlemen are  on  this  reorganization  scheme? 

Mr.  CLARK.  I  do  not. 

Senator  WOLCOTT.  You  know  that  their  names  are  on  the  reorganiza- 
tion committee  and  have  been  published? 

Mr.  CLARK.  Yes,  sir. 

Senator  WOLCOTT.  Did  you  know  that  Mr.  Depew  was  an  owner  of 
the  securities  of  the  Union  Pacific  Company? 

Mr.  CLARK.  I  did  not. 

Senator  WOLCOTT.  Have  you  now  any  information  on  that  subject? 

Mr.  CLARK.  I  have  not. 

Senator  WOLCOTT.  Has  it  occurred  to  you  that  the  Chicago-North- 
western influence  was  rather  conspicuous  in  this  reorganization  plan? 

Mr.  CLARK.  I  must  say  it  has  occurred  to  me. 

Senator  WOLCOTT.  But  you  have  given  it  no  special  thought? 

Mr.  CLARK.  No,  sir;  no  significance. 

Senator  WOLCOTT.  And  you  do  not  know  of  the  reason  for  it? 

Mr.  CLARK.  No;  I  do  not.  I  never  have  heard  a  reason  suggested 
for  it. 

Senator  WOLCOTT.  Are  all  your  agreements  with  the  Northwestern 
road  wholly  evidenced  in  the  one  document  to  which  Mr.  Mink  has 
made  reference? 

Mr.  CLARK.  Yes,  sir. 

Senator  WOLCOTT.  There  is  nothing  outside  of  that? 

Mr.  CLARK.  Nothing  outside  of  it. 

Senator  WOLCOTT.  Does  that  document  cover  the  question  of  ex- 
changing cars? 
PR 26 


402  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  CLARK.  I  think  so.  It  has  been  some  time  since  I  read  the 
document. 

Senator  WOLCOTT.  As  a  matter  of  fact,  you  run  their  through  sleep- 
ers between  Ogden  and  Chicago? 

Mr.  CLARK.  Yes. 

Senator  WOLCOTT.  And  you  do  this  for  no  other  road? 

Mr.  CLARK.  For  no  other  road — that  is,  regularly;  of  course  special 
cars  come  through. 

Senator  WOLCOTT.  And  your  relations  with  that  road  are  extremely 
close  ? 

Mr.  CLARK.  They  are  friendly.     > 

Senator  WOLCOTT.  They  are  pretty  close.  There  is  no  impropriety 
about  the  closeness  of  the  relations  of  the  two  roads.  I  simply  want 
to  ascertain  if  the  two  roads  continue  in  the  same  friendly  conditions 
as  heretofore. 

Mr.  CLARK.  I  may  answer  that  by  saying  that  we  are  more  harmoni- 
ous with  that  line  than  with  some  other  lines.  We  are  friendly  with 
all  connecting  lines. 

Senator  WOLCOTT.  Do  you  know  whether,  under  the  reorganization 
plan,  the  Union  Pacific  would  be  practically  absorbed  by  the  Chicago 
and  Northwestern? 

Mr.  CLARK.    I  do  not. 

Senator  WOLCOTT.  Whether  it  is  so  or  not  you  are  not  advised? 

Mr.  CLARK.  I  know  nothing  about  it. 

Senator  WOLCOTT.  If  the  reorganization  plan,  as  suggested,  should 
be  a  practical  absorption  of  the  Union  Pacific  by  the  Northwestern  it 
would  give  to  the  Northwestern  a  through  road  from  Chicago  to  Ogden, 
would  it  not  ? 

Mr.  CLARK.  I  should  say  so. 

Senator  WOLCOTT.  What,  in  your  opinion,  is  the  earning  capacity  of 
the  1,822  miles  of  the  Union  Pacific  road? 

Mr.  CLARK.  That  is  a  very  difficult  question  to  answer. 

Senator  WOLCOTT.  I  recognize  that. 

Mr.  CLARK.  My  judgment,  Senator,  on  that  point  is  worth  no  more 
than  yours. 

Senator  WOLCOTT.  It  is  worth  very  much  more. 

Mr.  CLARK.  I  think  not.  The  earning  capacity  of  the  road  depends 
entirely  upon  conditions.  The  conditions  that  exist  to-day  are  very 
peculiar.  If  they  were  continued  I  could  form  an  opinion,  but  if  these 
conditions  do  not  continue  nobody  can  tell  anything  about  it. 

Senator  WOLCOTT.  The  conditions  could  not  be  much  worse  than 
they  are  now. 

Mr.  CLARK.  I  think  they  could  be  very  much  worse,  Senator. 

Senator  WOLCOTT.  I  do  not  see  how. 

Mr.  CLARK.  The  conditions  all  over  this  country  are  changed,  and 
we  are  meeting  new  conditions  which  never  existed  before,  but  which 
we  will  have  to  meet  hereafter.  There  are  no  more  railroads  to  be 
built,  for  one  thing,  and  there  are  no  more  lands  to  be  acquired  by  mere 
settlement,  so  to  speak.  We  are  meeting  the  problem  of  overproduc- 
tion. All  these  things  enter  into  the  matter. 

Senator  WOLCOTT.  What  is  your  general  impression  as  to  the  earn- 
ing capacity  of  the  Union  Pacific  road? 

Mr.  CLARK.  With  the  conditions  existing  to-day,  and  with  the  future 
prospects  as  they  appear  to  me,  the  1,822  miles  of  that  road  will  earn 
in  the  neighborhood  of  $4,000,000  net  annually.  The  road  earned 
more  last  year,  but  that  was  because  of  the  exceedingly  close  economy 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  403 

practiced.  The  receivers  did  not  buy  a  steel  rail  in  1895  and  tbey  did 
the  business  of  the  road  at  the  lowest  possible  expense  in  all  its 
departments.  That  can  not  continue  with  good  judgment  even  for 
another  year.  We  need  steel  rails. 

Senator  WOLCOTT.  Is  the  road  in  bad  condition? 

Mr.  CLARK.  No;  I  would  not  operate  it  if  I  thought  it  in  bad  condi- 
tion. 

Senator  WOLCOTT.  But  it  needs  more  renewals  than  you  give? 

Mr.  CLARK.  More  than  we  gave  it  last  year. 

Senator  WOLCOTT.  But  as  the  conditions  are  at  present,  the  road  is 
good  for  $4,000,000  net  a  year? 

Mr.  CLARK.  Yes;  in  that  neighborhood. 

Senator  WOLCOTT.  What  would  be  your  counsel  and  advice  as  to 
the  best  method  of  settlement  of  the  Government  claim  in  the  interest 
of  the  Government? 

Mr.  CLARK.  In  my  humble  opinion  as  a  layman  a  commission  of 
straightforward,  upright  business  men  ought  to  be  appointed  by  Con- 
gress, who  should  go  out  into  that  country,  examine  it  thoroughly, 
going  back  to  its  construction,  taking  into  account  all  those  things  that 
Save  occurred,  and  then  make  a  report  of  the  facts.  If  I  were  one  of 
the  security  holders  I  would  be  willing  to  say  in  advance  that  I  would 
take  the  judgment  of  those  men  for  my  portion. 

Senator  BRICE,  Suppose,  Mr.  Clark,  that  you  were  constituted  sole 
commissioner;  you  have  made  all  the  examinations  and  have  a  full 
knowledge  of  all  the  facts;  you  Lave  been  president  of  that  railroad 
company  and  have  been  managing  the  railroad  property.  What  would 
you  recommend;  what  do  you  think  would  be  the  best  thing  to  do? 

Mr.  CLARK.  That  is  my  plan. 

Senator  WOLCOTT.  What,  in  your  opinion,  is  the  present  value  of  this 
Government  debt,  and  how  should  it  be  realized  to  the  best  interests  of 
the  Government  and  of  the  company? 

Mr.  CLARK.  I  claim  that  the  Government  debt  has  been  paid. 

Senator  WOLCOTT.  Do  you  think  that  nothing  is  due? 

Mr.  CLARK.  Yes ;  there  is  an  equity  which  should  be  considered  and 
canceled  by  payment. 

Senator  WOLCOTT.  How  much  should  be  paid? 

Mr.  CLARK.  I  feel  that  the  Government  debt  has  been  paid  in  the 
cheap  transportation  which  the  Government  has  had  as  against  what 
it  cost  before  the  road  was  constructed.  That  is  a  matter  of  equity 
and  justice,  I  consider.  So  with  the  Government  lands.  Millions  of 
acres  have  been  brought  into  the  market  by  the  construction  of  the 
railroad. 

Senator  WOLCOTT.  On  that  theory  there  is  no  question,  I  take  it, 
but  that  the  Government  has  been  benefited  a  great  deal  more  than  the 
road  has  cost  it,  if  that  is  what  you  mean? 

Mr.  CLARK.  That  is  what  I  mean. 

Senator  WOLCOTT.  But  we  are  confronted  by  the  fact  that  there  is  a 
debt  to  the  Government  in  dollars,  and  that  that  debt  has  got  to  be  met. 

Senator  FRYE.  Without  regard  to  equity? 

Mr.  CLARK.  On  the  shylock  process? 

Senator  WOLCOTT.  It  has  to  be  met  as  an  existing  debt,  and  I  want 
to  know  how,  in  your  opinion,  it  should  be  met. 

Mr.  CLARK.  I  hope  you  will  excuse  me  from  giving  an  opinion. 

Senator  WOLCOTT.  You  know  more  about  this  property  than  any 
man  living,  and  I  wish  you  would  give  us  some  suggestions. 

Senator  STEWART.  Suppose  you  owned  the  debt,  Mr.  Clark,  what 
would  you  take  for  it  ? 


404  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Mr.  CLARK.  I  believe  that  the  Government  can  afford  to  be  fair  iii 
tlie  matter. 

Senator  STEWART.  What  would  you  take? 

Mr.  CLARK.  I  would  take  the  principal,  if  T  could  get  it,  and  I  would 
scale  the  interest  to  a  fair  figure. 

Senator  WOLCOTT.  You  would  take  the  principal  in  cash.  How 
would  you  scale  the  interest?  Would  you  scale  it  for  a  cash  sum? 

Mr.  CLARK.  I  think  that  the  better  plan.  That  is  the  only  business 
way  to  do  it. 

Senator  WOLCOTT.  You  would  throw  off  some  of  the  interest  and 
settle  it  in  that  way?  I  am  inclined  to  think  that  that  is  correct.  But 
which  do  you  think  would  be  the  simpler  proposition  lor  the  railroad 
company — to  give  a  security  worth  35  per  cent  in  cash  for  the  interest 
or  to  pay  that  35  per  cent  in  cash  in  full  settlement  ? 

Mr.  CLARK.  I  do  not  know  that  I  fully  understand  your  question. 

Senator  WOLCOTT.  You  heard  my  questions  to  Mr.  Mink.  We  spoke 
of  a  mortgage  to  be  given  at  2  per  cent  for  the  interest. 

Mr.  CLARK.  Yes. 

Senator  WOLCOTT.  Mr.  Mink  was  of  opinion  that  the  bonds  secured 
by  this  mortgage  (a  second  mortgage)  would  be  worth  about  35  cents 
on  the  dollar.  Instead  of  offering  the  Government  a  mortgage  worth 
35  cents  on  the  dollar,  do  you  not  think  it  would  be  a  better  proposition 
for  the  company  to  find  a  way  to  pay  that  35  per  cent  in  cash  instead 
of  in  bonds  worth  35  per  cent? 

Mr.  CLARK.  If  the  company  could  do  so;  yes. 

Senator  WOLCOTT.  Do  you  not  think  it  is  as  feasible  for  the  com- 
pany to  pay  35  per  cent  in  cash  as  it  is  for  it  to  become  indebted  to  the 
Government  for  the  full  amount  in  a  mortgage  worth  only  35  per  cent 
in  cash  ? 

Mr.  CLARK.  I  am  not  sufficiently  familiar  with  financial  affairs  to 
express  an  opinion  on  that  subject. 

Senator  WOLCOTT.  Is  the  company  in  the  habit  of  paying  rebates 
since  your  receivership  ? 

Mr.  CLARK.  No,  sir. 

Senator  FRYE.  What  percentage  of  the  full  debt  of  the  company  to 
the  Government  would  be  the  entire  principal  due  the  Government  and 
35  per  cent  of  the  interest? 

The  CHAIRMAN.  We  made  a  calculation  and  found  it  would  be  a 
fraction  over  67  per  cent  of  the  whole  debt. 

Senator  WOLCOTT.  As  I  understood  Mr.  Mink's  testimony  (he  is  in 
the  room  and  can  correct  me  if  I  am  wrong),  the  general  outlook  which 
he  had  in  view  and  which  might  be  formulated  into  a  proposition  was 
this:  that  from  the  principal  of  the  debt  due  to  the  Government  the 
sinking  fund  should  be  deducted  and  the  difference  should  be  paid  in 
cash,  and  that  the  interest  should  be  secured  by  a  second  mortgage  at 
2  per  cent  on  the  property  of  the  1,822  miles  of  the  road.  Is  that  cor- 
rect, Mr.  Mink? 

Mr.  MINK.  Yes,  sir. 

Senator  WOLCOTT.  Eighteen  million  dollars  in  cash  and  $14,000,000 
in  value,  making  $32,000,000.  (To  Mr.  Mink) :  What  is  the  total  of  the 
Government  debt? 

Mr.  MINK.  Thirty-three  million  five  hundred  thousand  dollars. 

Senator  WOLCOTT.  And  the  interest? 

Mr.  MINK.  Including  the  interest  yet  to  accrue,  about  $38,000,000 — 
call  it  $40,000,000. 

Senator  WOLCOTT.  What  is  the  amount  of  the  sinking  fund  to  be 
applied  to  that  $33,500,000? 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  405 

Mr.  MINK.  Fifteen  million  two  hundred  thousand  dollars. 

Senator  WOLCOTT.  That  would  make  $18,000,000  cash  to  be  paid  to 
the  Government  and  $38,000,000  in  second-mortgage  bonds.  Thirty- 
five  per  cent  of  that  would  be  about  $40,000,000? 

Mr.  MINK.  Yes. 

Senator  WOLCOTT  (to  Mr.  Clark).  You  say  that  there  are  no  rebates 
being  paid  now? 

Mr.  CLARK.  There  are  not. 

Senator  WOLCOTT.  Is  the  road  in  politics  at  all  now? 

Mr.  CLARK.  No,  sir. 

Senator  WOLCOTT.  Is  the  road  spending  any  money  in  politics? 

Mr.  CLARK.  No,  sir. 

Senator  WOLCOTT.  You  never  dabble  in  politics  yourself? 

Mr.  CLARK.  No;  thank  God,  I  never  have  been  a  politician. 

The  CHAIRMAN.  You  have  been  connected  with  the  Union  Pacific 
many  years? 

Mr.  CLARK.  Yes. 

The  CHAIRMAN.  What  time  did  you  commence  your  connection  with 
that  road  ? 

Mr.  CLARK.  I  commenced  service  with  the  Union  Pacific  in  June,  1867. 

The  CHAIRMAN.  Shortly  after  the  road  was  completed? 

Mr.  CLARK.  Long  before. 

The  CHAIRMAN.  You  have  seen  that  country  develop  all  through  the 
line? 

Mr.  CLARK.  Indeed,  I  have.  Omaha  contained  a  population  at  that 
time  of  about  14,000,  and  beyond  Omaha  there  were  hardly  any 
inhabitants. 

The  CHAIRMAN.  The  country  has  developed  in  farming  and  pastoral 
pursuits? 

Mr.  CLARK.  Yes. 

The  CHAIRMAN.  Also  in  mining? 

Mr.  CLARK.  Yes;  but  in  a  pastoral  and  grazing  sense  it  has 
deteriorated. 

The  CHAIRMAN.  That  is  but  a  recent  incident.  What  percentage  in 
business  is  estimated  to  come  to  the  Union  Pacific  line  proper  from  the 
country  lying  adjacent  to  the  line,  or  tributary  to  the  line? 

Mr.  CLARK.  Mr.  Monroe,  who  has  charge  of  the  traffic  matters,  says 
it  is  25  per  cent. 

The  CHAIRMAN.  The  rest  of  the  business  is  from  through  business! 

Mr.  CLARK.  Yes. 

The  CHAIRMAN.  Coming  from  the  Oregon  Short  Line  and  other  con- 
necting lines? 

Mr.  CLARK.  Yes. 

The  CHAIRMAN.  The  construction  of  other  lines  of  railroad  has 
reduced  the  tonnage  from  the  adjacent  country,  has  it? 

Mr.  CLARK.  Immensely. 

The  CHAIRMAN.  And  you  consider  that  the  present  Union  Pacific 
line  furnishes  only  25  per  cent  of  the  business,  and  that  if  these  other 
lines  which  have  been  added  to  the  Union  Pacific  system  were  cut  off 
you  would  have  to  depend  largely  upon  your  local  traffic? 

Mr.  CLARK.  Precisely  so.  There  are  other  connections  besides  the 
Union  Pacific  for  all  of  these  roads,  and  if  they  were  to  use  their  other 
connections  exclusively  the  Union  Pacific  would  be,  in  railroad  par- 
lance, "bottled  np." 

The  CHAIRMAN.  There  is  the  Northeastern  on  one  side  and  the  Bur- 
lington on  the  other? 


406  GOVERNMENT   DEBT    OF   THE   PACIFIC    RAILROADS. 

Mr.  CLARK.  And  the  Oregon  Short  Line. 

The  CHAIRMAN.  They  all  have  connections  outside  of  the  Union 
Pacific  which  they  could  use? 

Mr.  CLARK.  Yes. 

The  CHAIRMAN.  So  the  value  of  your  property  must  depend  largely 
upon  your  maintaining  amicable  relations  with  those  lines? 

Mr.  CLARK.  Almost  wholly. 

The  CHAIRMAN.  Do  you  consider  that  the  country  that  the  line  runs 
through  has  absolutely  reached  its  highest  point  of  advancement  in  a 
degree? 

Mr.  CLARK.  I  do. 

The  CHAIRMAN.  Almost  all  of  the  land  left  being  inarable  and 
unpasturable? 

Mr.  CLARK.  Yes;  I  mean  it  will  be  years  hence  before  that  country 
will  show  any  great  improvement. 

The  CHAIRMAN.  And  a  large  part  of  the  value  of  the  country  will 
depend  upon  ability  to  irrigate  it? 

Mr.  CLARK.  Yes. 

The  CHAIRMAN.  On  the  other  hand,  the  coast  country  will  naturally 
develop  immediately? 

Mr.  CLARK.  Yes;  and  I  think  you  may  include  the  new  States  of 
Utah  and  Idaho  as  progressing  in  the  way  of  development — also  Colo- 
rado. But  along  the  present  line  of  the  Union  Pacific  there  is  no  real 
prospect  of  a  farther  increase  of  business. 

The  CHAIRMAN.  And  the  proximity  of  parallel  lines  of  road  of  course 
takes  a  large  percentage  which  you  had  been  able  to  get  formerly? 

Mr.  CLARK.  That  is  so. 

The  CHAIRMAN.  Can  you  tell,  in  round  numbers,  what  the  Union 
Pacific  has  cost? 

Mr.  CLARK.  My  recollection  is  that  it  cost  something  over  $60,000  a 
mile. 

The  CHAIRMAN.  For  how  many  miles? 

Mr.  CLARK.  About  1,830  miles. 

The  CHAIRMAN.  Then  it  cost  a  little  over  $100,000,000? 

Mr.  CLARK.  Yes. 

The  CHAIRMAN.  What  could  that  line  be  replaced  for  to-day? 

Mr.  CLARK.  For  less  than  half. 

The  CHAIRMAN.  Probably  for  $50,000,000? 

Mr.  CLARK.  Yes ;  I  should  think  so.  I  think  that  $30,000  a  mile  would 
duplicate  that  property. 

The  CHAIRMAN.  Is  the  motive  power  first-class  now? 

Mr.  CLARK.  No,  sir;  we  have  a  variety  of  engines.  The  original 
engines,  those  that  have  been  there  for  a  number  of  years,  are  small, 
light,  and  old-fashioned.  We  have,  however,  a  very  fair  percentage  of 
good,  strong-power  engines. 

The  CHAIRMAN.  How  many  cars  can  you  haul  with  those  old-fash- 
ioned engines? 

Mr.  CLARK.  That  depends  entirely  upon  the  grade.  Between  Omaha 
and  Denver  one  of  those  small  engines  can  probably  haul  twenty  cars. 

The  CHAIRMAN.  And  to  Cheyenne? 

Mr.  CLARK.  Not  over  eight. 

The  CHAIRMAN.  What  is  the  traction  power  of  your  larger  engines? 

Mr.  CLARK.  Our  biggest  engines  are  what  we  call  the  1,400  and  1,600 
class.  They  are  20  by  24  cylinder.  These  engines  will  pull  about  two 
and  one-half  times  as  much  as  the  others. 

The  CHAIRMAN.  They  will  carry  twenty  cars  instead  of  eight? 

Mr.  CLARK.  Yes. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  407 

The  CHAIRMAN.  What  is  about  the  average  percentage  of  operating 
expenses  on  your  road  ? 

Mr.  CLARK.  I  should  say  70  per  cent. 

The  CHAIRMAN.  Why  are  they  so  much  higher  than  on  other  west- 
ern roads'?  For  instance,  the  Northwestern  and  other  roads  in  Iowa? 

Mr.  CLARK.  The  Northwestern  is  not  a  parallel  case. 

The  CHAIRMAN.  Well,  take  the  Burlington,  where  they  have  got  high 
grades  and  high  curves  as  compared  with  the  Northwestern. 

Mr.  CLARK.  It  depends,  of  course,  on  fuel  and  labor  and  the  amount  of 
traffic.  These  elements  all  enter  into  the  question  of  operating  expenses. 

The  CHAIRMAN.  Where  do  you  get  your  coal? 

Mr.  CLARK.  Largely  at  Eock  Springs,  Wyo. 

The  CHAIRMAN.  You  have  to  haul  that  coal  East  and  West? 

Mr.  CLARK.  Yes;  mostly  to  points  East. 

The  CHAIRMAN.  Does  the  company  own  those  mines? 

Mr.  CLARK.  Yes. 

The  CHAIRMAN.  About  how  much  does  the  coal  cost  you? 

Mr.  CLARK.  I  take  it  about  $3  a  ton. 

The  CHAIRMAN.  And  this  high  rate  of  operating  expenses — 70  per 
cent — comes  from  high  grades  and  light  locomotives'? 

Mr.  CLARK.  Yes;  and  from  the  cost  of  coal,  and  from  bad -business. 

Senator  FRYE.  Does  the  coal  delivered  at  Eock  Springs  on  board 
the  train  cost  $3  a  ton  net? 

Mr.  CLARK.  No;  but  with  the  cost  of  transportation  to  the  point  of 
using  added  it  costs  the  company  $3  a  ton. 

The  CHAIRMAN.  Are  your  water  facilities  good? 

Mr.  CLARK.  Very  much  better  than  formerly.  We  have  put  down 
artesian  wells  which  furnish  a  sufficient  amount  of  fairly  good  water. 

The  CHAIRMAN.  You  have  no  arrangement,  as  general  manager  and 
superintendent  of  the  company,  by  which  you  give  one  road  connecting 
with  the  Union  Pacific  greater  facilities  than  you  give  other  roads? 

Mr.  CLARK.  Only  in  the  case  of  the  Northwestern. 

Adjourned. 


WASHINGTON,  D.  C.,  Thursday,  March  19, 1896. 

The  committee  met  at  2.30  p.  m. 

Present:  Senators  Gear  (chairman),  Stewart,  and  Brice. 

PACIFIC  EAIIjEOAD  FIEST-MOETGAGE  BOXDS. 
STATEMENT  OF  LEONARD   C.  BLAISDELL. 

Leonard  C.  Blaisdell,  of  Indianapolis,  Iiid.,  counselor  at  law,  sworn 
and  examined : 

The  CHAIRMAN.  You  may  proceed  and  make  your  statement. 

Mr.  BLAISDELL.  The  statement  which  I  have  to  make  under  oath 
respecting  the  subject-matter  of  claims  represented  by  myself  as  attor- 
ney in  fact  of  claimants  against  the  United  States,  will  be  found 
expressed  in  case  18003  in  the  Court  of  Claims.  It  is  therein  set  forth 
that  by  virtue  of  the  action  of  the  Secretary  of  the  Treasury  and  of  the 
First  Comptroller  of  the  Treasury  on  April  22,  1884,  the  rights,  privi- 
leges, and  franchises  of  these  creditors  of  the  Union  Pacific,  the  Central 
Pacific,  and  other  Pacific  railroad  companies  (to  which  were  granted 
loans  by  the  United  States  in  aid  of  the  construction  of  these  roads  and 


408  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

telegraph  lines  to  the  amount  of  $64,623,512),  were  made  subject  to  the 
rights  of  the  lawful  and  just  holders  of  the  lien  prior  and  paramount  to 
that  of  the  United  States,  as  expressed  in  the  eighth  section  of  the 
act  of  1864,  and  as  further  expressed  in  the  eighth  section  of  what  is 
commonly  named  the  Thurman  Act. 

That,  on  the  said  date,  a  contract  or  agreement  was  entered  into  with 
myself,  by  which  the  United  States  undertook  to  issue  call  bonds  on  the 
said  Pacific  Eailroad  Companies,  payable  January  1,  1885,  at  the  sub- 
treasury  in  the  city  of  New  York.  It  was  further  agreed  that  the 
amount  of  interest  on  the  accrued  indebtedness,  so  described  as  of  lien 
paramount  to  that  of  the  United  States,  should  be  converted  into  United 
States  sinking  fund  bonds  bearing  the  rate  of  5  per  cent  interest,  to 
date  from  March  3,  1883,  and  made  payable  by  the  United  States  on 
August  16,  1894.  I  further  state  that  the  complete  statement  in  rela- 
tion to  all  the  particulars  of  this  transaction  has  been  heretofore  made 
repeatedly,  and  finally  under  the  determination  of  the  late  President, 
Harrison,  and  will  be  found  in  pamphlet  form  with  the  Executive,  and 
also  copies  with  the  Secretary  of  the  Treasury,  with  the  Secretary  of 
the  Interior  Department,  and  in  the  Department  of  Justice.  Certified 
copies  under  oath  will  be  found  in  all  the  Departments. 

The  CHAIRMAN.  Have  you  a  copy  of  that  document? 

Mr.  BLAISDELL.  Yes;  I  will  furnish  full  printed  copies. 

Senator  STEWART.  I  would  like  to  know  what  this  controversy  is 
about. 

Mr.  BLAISDELL.  I  did  not  expect  to  present  the  matter  in  full  at 
this  time.  I  expected  to  get  an  appointment  to  do  so.  We  would  have 
to  go  to  our  rooms  and  bring  our  papers. 

Senator  STEWART.  What  is  the  nature  of  the  claim  you  were  speak- 
ing off 

Mr.  BLAISDELL.  The  nature  of  the  claim  is,  that  while  we  admit 
that  the  Government  is  the  actual  holder  of  the  sinking  fund,  we 
claim  every  dollar  in  the  sinking  fund  by  virtue  of  the  Government 
being  our  agent  to  collect  that  money.  The  Government  is  a  trustee. 

Senator  STEWART.  And  you  are  the  bondholders? 

Mr.  BLAISDELL.  We  are  bondholders  in  this  way:  In  this  same 
meeting,  on  April  22,  1884,  I  held  in  my  hand  the  bonds  of  the  Union 
Pacific,  of  the  Central  Pacific,  and  of  the  other  Pacific  railways  named 
in  the  Thurman  Act,  which  are  secured  by  mortgage,  and  which  are 
expressed  therein  as  a  lien  prior  and  paramount  to  that  of  the  United 
States. 

Senator  STEWART.  We  all  understand  that. 

Mr.  BLAISDELL.  That  is  the  way  we  are  bondholders. 

Senator  STEWART.  To  what  amount  are  you  bondholders! 

Mr.  BLAISDELL.  To  the  amount  of  $64,644,000. 

Senator  STEWART.  You  represent  those  bonds'? 

Mr.  BLAISDELL.  We  do. 

The  CHAIRMAN.  Are  you  the  attorney  in  fact? 

Mr.  BLAISDELL.  I  am  the  attorney  in  fact  and  of  record? 

Senator  STEWART.  For  all  the  bondholders'? 

Mr.  BLAISDELL.  Yes;  for  all  of  them. 

Senator  STEWART.  What  do  they  want? 

Mr.  BLAISDELL.  They  want  this  money. 

Senator  STEWART.  With  reference  to  this  sinking  fund,  what  legal 
right  do  you  claim? 

Mr.  BLAISDELL.  Just  this,  that  the  purposes  of  the  sinking  fund, 
by  law,  would  be  subserved  in  the  period  of  thirty  years  (the  life  of 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  409 

the  bonds),  and  that  at  the  end  of  the  thirty  years  the  amount  due 
should  be  settled  up. 

The  CHAIRMAN.  You  seem  by  this  document  to  have  the  case  in  the 
Court  of  Claims? 

Mr.  BLAISDELL.  Yes;  but 'we  do  not  bring  before  you  the  question 
which  we  have  before  the  Court  of  Claims. 

Senator  STEWART.  Do  I  understand  that  these  bonds  were  issued 
by  the  United  States? 

Mr.  BLAISDELL.  No;  they  were  issued  by  the  Pacific  railroads. 

The  CHAIRMAN.  They  are  the  first-mortgage  bonds? 

Mr.  BLAISDELL.  Yes;  the  bonds  issued  by  the  Pacific  railroads  as 
first-mortgage  bonds  are  what  we  are  claiming. 

Senator  STEWART.  What  relation  have  you  directly  to  the  sinking 
fund;  what  claim  have  you  on  it? 

Mr.  BLAISDELL.  I  have  a  claim  on  it  of  this  character;  I  was  a 
party  to  loaning  every  dollar  which  has  come  into  that  sinking  fund, 
exclusive  of  what  was  collected  and  is  to  be  collected  under  the  Thur- 
man  Act,  which  amounted  to  $19,000,000  or  $20,000,000. 

Senator  STEWART.  Did  you  have  any  contract  with  the  Government 
or  anybody  else,  independent  of  your  contract  with  the  railroad  com- 
panies, under  which  these  bonds  were  issued? 

Mr.  BLAISDELL.  Yes. 

Senator  STEWART.  What  contract  have  you? 

Mr.  BLAISDELL.  It  is  expressed  in  the  transaction  between  myself 
and  the  officers  of  the  Government — the  First  Comptroller,  the  Secre- 
tary of  the  Treasury,  and  another  Cabinet  officer,  and,  I  may  say,  the 
entire  Cabinet,  with  the  exceptions  of  the  Secretary  of  War,  the  Secre- 
tary of  the  Navy,  and  the  Postraaster-General. 

Senator  STEWART.  Are  these  first-mortgage  bonds  due? 

Mr.  BLAISDELL.  Yes;  the  Central  Pacific  bonds  all  matured  in 
1892  and  the  Union  Pacific  bonds  matured  in  1894. 

Senator  STEWART.  Under  what  law  did  the  First  Comptroller  and 
those  other  officers  of  the  Government  make  any  special  contract  with 
the  bondholders  of  the  Pacific  railroads? 

Mr.  BLAISDELL.  The  statement  made  to  me  was,  that  it  was  under 
the  general  provisions  of  the  law  which  had  been  made  with  reference 
to  the  Pacific  railroads,  but  the  specific  act,  on  which  this  meeting 
took  place  and  this  transaction  took  place,  was  that  decision  of  the 
Supreme  Court  by  which  the  Secretary  of  the  Treasury  had  been 
instructed  that  the  Government  could  make  no  further  demands  on  the 
roads  for  moneys,  for  the  reason  that  the  accrued  interest  on  the  bonds 
of  the  paramount  lien  remained  unpaid,  and  the  companies  claimed  the 
right  to  pay  that  interest  before  the  Government  could  demand  any 
money.  The  particular  decision  can  be  found  in  196  United  States 
Keports. 

Senator  STEWART.  The  companies  did  pay  the  interest  until  they 
defaulted  ? 

Mr.  BLAISDELL.  They  paid  a  certain  portion  of  the  net  earnings. 

Senator  STEWART.  Did  not  the  companies  pay  the  interest  on  the 
first-mortgage  bonds  until  the  recent  default? 

Mr.  BLAISDELL.  No,  sir. 

Senator  STEWART.  When  did  the  different  roads  default? 

Mr.  BLAISDELL.  The  decision  of  the  First  Comptroller  was  on  the 
22d  of  April,  1884. 

Senator  STEWART.  What  roads  defaulted  then? 

Mr.  BLAISDELL.  All  of  them. 


410  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

Senator  STEWART.  You  mean  in  paying  interest  to  the  first-mort- 
gage bondholders? 

Mr.  BLAISDELL.  Yes ;  the  question  was  put  to  Judge  Brewster,  the 
Attorney-General,  by  Judge  Folger,  the  Secretary  of  the  Treasury. 
Judge  Folger  said :  "We  have  here  what' represents  payment;  but  I 
put  the  question  to  you,  Judge  Brewster,  and  ask  you  whether  these 
bonds  which  act  in  the  way  of  accrued  interest  constitute  payment 
within  the  meaning  of  the  law?"  And  Judge  Brewster  said  they 
did  not. 

Senator  STEWART.  I  thought  that  these  roads  kept  on  paying  inter- 
est on  their  first-mortgage  bonds? 

Mr.  BLAISDELL.  Not  a  cent  has  been  paid  except  in  that  way.  Some- 
where from  $20,000,000  to  $27,000,000  has  gone  into  the  Treasury,  and 
the  Government  has  given  to  the  railroad  companies  credit  for  the 
money  that  has  gone  into  the  sinking  fund.  Some  of  the  bookkeeping 
calls  it  payment  of  interest;  but  the  Supreme  Court  has  said  that  it  is 
just  simply  a  fund  there. 

Senator  STEWART.  This  is  a  new  statement  of  the  whole  thing. 

Mr.  BLAISDELL.  I  expect  it  is.  I  expect  that  it  overturns  every 
theory  on  that  subject. 

Senator  STEWART.  You  pretend  to  say  that  these  Pacific  railroad 
companies  have  paid  no  interest  on  their  first-mortgage  bonds? 

Mr.  BLAISDELL.  Practically  speaking,  not  one  cent  I  admit  what 
they  paid  into  the  Treasury,  but,  as  to  any  actual  payment  to  the  actual 
bondholders,  there  has  not  been  a  cent  of  interest  paid  on  the  first- 
mortgage  bonds. 

Senator  STEWART.  I  ask  you  if  you  mean  it  to  be  understood  that 
the  companies  have  paid  no  interest  on  their  first-mortgage  bonds? — I 
do  not  mean  on  the  Government  subsidy  bonds. 

Mr.  BLATSDELL.  I  answer  the  question  by  saying  just  what  Secretary 
Folger  said:  "They  have  executed  their  bonds  and  lodged  them  with 
the  Secretary  of  the  Treasury,  and  pay  accrued  interest."  I  mean  the 
bonds  issued  by  the  Pacific  railroads  and  not  the  bonds  issued  by  the 
Government  in  aid. 

Senator  STEWART.  And  you  say  that  there  has  not  been  a  cent  of 
interest  paid  on  them  ? 

Mr.  BLAISDELL.  Except  by  Government  credits.  Credits  have  been 
given  to  them. 

Senator  BRICE.  Inasmuch  as  the  holders  of  each  one  of  the  bonds 
did,  in  fact,  get  his  interest  every  six  months,  and  has  done  so  for  thirty 
years,  where  did  they  get  that  interest  from? 

Mr.  BLAISDELL.  I  do  not  say  that  they  did  get  it. 

Senator  BRICE.  But  I  do,  for  I  have  held  some  of  the  bonds  and 
have  been  paid  the  interest  on  them. 

Mr.  BLAISDELL.  And  you  do  not  know  that  more  than  $64,000,000  of 
these  bonds  have  been  floated  which  never  have  been  guaranteed  by  an 
act  of  Congress?  I  admit  that  any  amount  of  bonds  may  have  been 
floating,  on  which  the  companies  have  been  paying  interest. 

Senator  BRICE.  Who  holds  these  bonds? 

Mr.  BLAISDELL.  The  Government,  for  the  actual  owners. 

Senator  BRICE.  Where  are  they  stored? 

Mr.  BLAISDELL.  In  the  office  of  the  Secretary  of  the  Treasury. 

Senator  STEWART.  Where  are  the  bonds  that  you  speak  of  ? 

Mr.  BLAISDELL.  I  will  not  say  where  they  are,  but  I  know  where 
they  ought  to  be.  They  were  left  in  the  custody  of  the  Secretary  of  the 
Treasury,  and  they  were  to  be  redeemed. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  411 

Senator  STEWART.  Let  us  see  if  we  understand  each  other.  In  the 
aggregate  there  were  $64,000,000  of  subsidy  bonds,  and  the  same 
amount  of  first-mortgage  bonds.  Drop  everything  but  the  first-mort- 
gage bonds  issued  by  the  company.  Do  I  understand  you,  no  interest 
has  been  paid  on  these  first-mortgage  bonds? 

Mr.  BLAISDELL.  Not  to  the  lawful  holders.  There  has  been  to  the 
Government,  but  not  to  the  lawful  holders. 

The  CHAIRMAN.  Who  are  the  lawful  holders? 

Mr.  BLAISDELL.  The  heirs  at  law  of  Charles  Durkee. 

The  CHAIRMAN.  Did  he  own  them  all? 

Mr.  BLAISDELL.  Every  one  of  them. 

The  CHAIRMAN.  How  did  he  acquire  them! 

Mr.  BLAISDELL.  By  purchase. 

The  CHAIRMAN.  From  whom? 

Mr.  BLAISDELL.  From  holders  to  whom  the  companies  had  issued 
them. 

The  CHAIRMAN.  Are  these  bonds  in  evidence  anywhere? 

Mr.  BLAISDELL.  I  claim  that  they  ought  to  be  in  vaults  75  and  85,  in 
the  Treasury  Department. 

The  CHAIRMAN.  You  claim  that  they  were  deposited  there? 

Mr.  BLAISDELL.  Yes;  by  order  of  Secretary  Folger. 

The  CHAIRMAN.  You  claim  that  they  were  issued  by  the  Pacific  rail- 
road companies? 

Mr.  BLAISDELL.  Yes. 

The  CHAIRMAN.  And  put  in  trust  of  the  Government? 

Mr.  BLAISDELL.  Put  into  the  hands  of  the  Secretary  of  the  Treasury. 

The  CHAIRMAN.  For  the  benefit  of  any  one  person  or  of  a  given 
number  of  persons? 

Mr.  BLAISDELL.  No;  but  as  the  court  describes  it  in  its  opinion,  "for 
the  benefit  of  the  lawful  and  just  holders." 

The  CHAIRMAN.  You  claim  here  to  be  the  holders  of  these  bonds 
through  some  heirship  or  contract  representing  the  estate  of  Charles 
Durkee? 

Mr.  BLAISDELL.  Yes. 

The  CHAIRMAN.  Then  why  do  you  not  go  to  the  Secretary  of  the 
Treasury  and  make  application  to  him  to  carry  out  the  law? 

Mr.  BLAISDELL.  That  is  what  we  are  asking  Congress  to  do. 

The  CHAIRMAN.  If  you  and  the  parties  in  interest  own  these  bonds, 
it  seems  to  me  that  you  should  go  to  the  Secretary  of  the  Treasury  and 
demand  payment  from  him. 

Mr.  BLAISDELL.  There  is  a  difficulty  in  talking  to  you  about  this 
matter  without  knowing  that  I  was  going  to  talk  about  it.  I  should 
have  brought  the  record  along  with  me;  not  only  the  Thurrnan  Act  but 
the  act  of  March  3,  1887 — an  act  which  I  drafted,  and  which  Senator 
Cullom  got  through  for  the  purpose  of  protecting  these  particular 
interests. 

Senator  BRICE.  This  is  a  very  important  matter,  and  you  should  have 
your  documents  and  an  opportunity  to  present  them. 

Mr.  BLAISDELL.  I  did  not  expect  to  be  rushed  into  this  subject  at  all. 

Senator  BRICE.  The  witness  ought  to  lay  before  the  committee  his 
propositions  in  proper  order. 

Senator  STEWART.  Yes;  and  submit  a  statement  in  writing. 

Mr.  BLAISDELL.  I  will  do  that. 

Adjourned  until  Saturday,  March  21,  at  11  a.  m. 


412  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

WASHINGTON,  D.  C., 

Saturday,  March  21,  1896. 
The  committee  met  at  11  a.  in.    Present,  the  chairman. 

INTEREST  ON  FIRST-MORTGAGE  BONDS. 
STATEMENT  OF  MR,  LEONARD  C.  BLAISDELL— Continued. 

Leonard  C.  Blaisdell  appeared  before  the  committee,  and  submitted 
the  following  statement: 

My  own  personal  relation  to  this  matter  of  Pacific  railroad  bonds 
began  about  the  year  1882.  During'  that  year  and  the  succeeding  one 
of  1883  there  was  a  considerable  amount  of  correspondence  between 
myself  and  the  Department  of  the  Treasury.  The  principal  part  of 
such  correspondence  was  between  myself  on  the  one  part,  and  the  late 
Secretary  of  the  Treasury,  the  Hon.  Charles  J.  Folger,  and  the  late 
First  Comptroller  of  the  Treasury,  the  Hon.  William  Lawrence. 

The  subject  of  that  correspondence  was  confined  strictly  to  a  single 
question  proposed  by  me,  to  wit:  "  What  bonds  of  indemnity  to  the 
United  States  were  signed  by  Charles  Durkee,  late  governor  of  the 
Territory  of  Utah,  during  his  lifetime,  and  which  bonds  had  been 
canceled  P 

The  greater  part  of  this  correspondence  occurred  during  the  year 
1882.  During  its  pendency,  however,  while  there  was  no  satisfactory 
answer  to  my  question,  there  was  manifested  on  the  part  of  the  officials 
with  whom  I  corresponded  a  desire  to  encourage  my  further  inquiries. 

At  this  juncture,  or  the  beginning  of  the  year  1883,  it  was  officially 
communicated  to  me  u  that  one  of  the  two  or  more  bonds  of  indemnity, 
signed  by  Charles  Durkee,  was  in  behalf  of  Franklin  H.  Head  and  per- 
tained to  Indian  agency;  that  such  bonds  had  been  duly  canceled." 
This  not  being  satisfactory  (to  me)  I  made  further  inquiry  as  to  what 
connection,  if  any,  Mr.  Durkee  appeared  to  have  with  either  the  con- 
struction or  security  for  construction  of  any  part  of  the  Pacific  rail- 
road lines. 

The  reason  I  had  for  pressing  my  inquiries  further  was  that  my  inves- 
tigation before  this  time  had  fully  satisfied  me  that,  no  matter  in  what 
form  consisted  the  bulk  of  the  estate  of  Charles  Durkee,  it  had  been 
sequestered  from  its  lawful  heirs.  I  had  informed  the  Department  that 
the  probate  records  of  Kenosha  County,  Wis.,  disclosed  the  fact  that  a 
"  bargain  or  assignment"  of  matters  of  estate  not  mentioned  in  inven- 
tory had  been  made  between  Caroline  Durkee  (the  widow  of  Charles 
Durkee)  and  one  Harvey  Durkee  (an  executor  of  the  estate),  and  that 
such  procedure  had  been  in  fraud  of  the  rights  of  next  of  kin,  claim- 
ants as  heirs  at  law,  under  the  ordinance  of  1787. 

I  am  satisfied  that  it  was  this  information  alone,  unsupported  by 
anything  that  I  personally  knew  about  the  assets  of  said  estate,  that 
caused  me  to  receive  soon  afterwards  instructions  in  official  manner, 
from  both  the  Secretary  of  the  Treasury  and  the  First  Comptroller,  what 
course  I  should  pursue,  and  to.report  to  the  Department  when  I  should 
have  complied  with  instructions  and  completed  the  arrangements  1  was 
directed  to  make. 

The  directions  were  to  commence  a  suit  in  equity  procedure  in  a 
United  States  court  having  jurisdiction  over  the  person  of  one  of  the 
executors  of  the  will  of  the  late  Charles  Durkee,  and  that  when  such 
suit  should  have  been  instituted  to  report  forthwith  to  the  head  of  the 
Treasury  Department  for  further  advices. 

Therefore,  having  complied  literally  with  these  instructions  and  filed 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  413 

the  suit  in  the  supreme  court  of  Cook  County,  in  Chicago,  on  the  15th 
day  of  April,  1884,  on  the  22d  day  of  that  month  and  year  I  was  pre- 
sented by  the  lion.  Joseph  G.  Cannon  to  the  Treasury  clerk,  Amos  Web- 
ster. Mr.  Cannon  requested  Mr.  Webster  to  look  over  the  papers  I  had 
to  present  to  him,  and,  further,  to  immediately  call  together  such  offi- 
cials as  the  papers  seemed  to  require  to  make  the  required  investigations, 
which  all  related  to  Pacific  railroad  bonds  and  Charles  Durkee's  obli- 
gations to  the  United  States  on  bonds  of  indemnity. 

Within  a  short  time  there  came  into  the  Treasury  building  Judge 
Lawrence,  First  Comptroller;  Judge  Folger,  Secretary  of  the  Treasury; 
Judge  Brewster,  Attorney-General;  Secretary  of  State  Frelinghuy- 
sen,  and  several  other  officers,  each  bearing  in  hand  a  large  bundle 
of  papers.  Mr.  Webster  presented  me,  and  with  little  delay  I,  with  all 
these  officials,  was  ushered  into  a  room  I  understood  to  be  the  office 
of  Judge  Lawrence;  and  he  further  continued  the  introduction  by 
making  the  statement  that  1  was  the  person  who  had  been  making  all 
the  inquiries  of  the  Department  respecting  the  relations,  if  any,  that 
the  estate  of  Charles  Durkee  bore  to  the  affairs  and  business  of  such 
Department. 

Immediately  Judge  Lawrence  began  to  interrogate  me  as  to  what 
knowledge  I  had  acquired  relative  to  the  subject-matter  of  the  proposed 
investigation.  After  ascertaining  that  I  knew  practically  nothing  of 
Charles  Durkee's  ownership  of  Pacific  railroad  or  other  bonds  (at  that 
time),  he  proceeded  to  examine  the  power  of  attorney,  court  papers, 
and  official  -letters  which  I  had  brought  with  me;  and  at  the  conclu- 
sion of  his  examinations  he  addressed  Judge  Folger  in  a  formal  way, 
declaring  that  the  powers  of  attorney  presented  under  the  provisions 
of  the  ordinance  of  1787  constituted  me  the  legal  representative  of  the 
estate  of  the  late  governor  of  the  Territory  of  Utah,  and  that  any  busi- 
ness he  might  have  with  such  estate  could  be  legally  transacted 
with  myself.  Then  Judge  Folger  arose  and  stated  what  the  business 
was  that  he  desired  to  transact  and  the  purposes  to  be  effected,  if  found 
practical,  in  the  joint  meeting  of  officials  present  and  myself. 

Judge  Folger,  then  directing  his  conversation  to  the  Attorney- 
General,  Judge  Brewster,  rapidly  recited  the  enactments  of  1SG2,  18G4, 
and  of  1878,  respecting  Pacific  railroads,  and  concluded  by  stating 
that  there  had  been  in  all  some  forty  or  more  suits  between  the  Gov- 
ernment and  these  corporations  over  the  question  of  what  constituted 
"net  earnings"  and  the  resultant  rights  or  privileges  of  the  Govern- 
ment to  collect  moneys  from  the  said  corporations  for  the  purposes 
named  in  the  last  enactment  mentioned,  or  the  Thurman  Act. 

At  about  this  stage  of  the  proceedings  Judge  Folger  turned  his 
attention  to  the  vast  number  of  papers,  files,  and  records  of  various 
kinds  that  lay  on  the  tables,  picking  up  different  ones  iu  his  hand  as 
he  continued  his  remarks  to  Judge  Brewster.  " These,"  he  said,  point- 
ing to  the  first  collection,  "are  the  first-mortgage  bonds  issued  by  the 
Union,  the  Central,  and  other  Pacific  railroad  corporations,  as  under 
the  provisions  of  the  act  of  1SG4."  Next,  he  said,  "We  have  here  a 
large  amount  of  bonds,  issued  by  the  same  corporations,  which  have 
been  issued  to  secure  payment  of  interest  accrued  on  the  principal 
bonds.  These  first-mortgage  bonds  differ  from  all  others,  in  that  they 
are  guaranteed  by  act  of  Congress,  as  lawfully  paramount  to  the  rights 
and  interests  of  the  United  States  in  respect  of  its  mortgage  against 
the  same  corporations,  and  each  and  every  one,"  said  he  [holding  some 
of  them  up  in  his  hands,  so  as  to  be  seen  by  all  present],  "are  assigned 
to  one,  sole,  assignee — Charles  Durkee." 


414  GOVERNMENT   DEBT    OF    THE    PACIFIC   EAILROAD8. 

Then,  exhibiting  some  of  the  interest  bonds,  Judge  Folger  explained 
that  those,  as  well  as  the  first-mortgage  bonds,  were  issued  in  the  form 
of  call  bonds,  by  the  terms  of  which,  on  any  default  being  made  in  the 
payment  of  the  same  on  the  demand  of  the  legal  holder  or  his  legal 
representatives,  the  right  of  foreclosure  immediately  vested  in  the  holder. 
"Therefore,"  said  he,  "I  have  contended  against  the  practice  heretofore 
adopted,  of  treating  these  bonds  as  payments  of  interest,  however 
good  they  may  be  as  securities,  and  have  contended  that  they  do  not, 
within  the  meaning  of  the  law,  constitute  payment  of  the  interest.  To 
you,  Judge  Brewster,  I  present  the  question  for  your  decision."  Judge 
Brewster  promptly  replied:  "  Judge,  I  fully  concur  in  your  conclusion. 
That  is  my  judgment  also."  Then  Judge  Folger  immediately  turned 
himself  about,  and,  facing  me,  said:  "You  have  just  heard  the  decision 
of  Judge  Brewster,  the  Attorney-General.  What  do  you  want  done 
with  these  bonds'?" 

I  answered:  "I  should  prefer  to  leave  the  whole  matter  to  your  dis- 
cretion, Judge  Folger.  I  can  not  determine  what  disposition  shall  be 
made  of  these  bonds;  that  is  for  you  to  say." 

"Let  me  put  the  question  in  this  way:  Do  you  want  these  mortgages 
foreclosed?" 

Mr.  BLAISDELL.  "That  depends  upon  how  much  money  can  be 
realized  out  of  them  without  foreclosure." 

Judge  FOLGER.  "  I  think  that  the  amount  of  the  Central's  bonds, 
with  the  interest  accrued,  might  be  collected  by  giving  plenty  of  time." 

Mr.  BLAISDELL.  "What  is  the  amount  of  the  Central's  bonds?" 

Judge  FOLGER.  "$25,885,120." 

Mr.  BLAISDELL.  "You  think  that  amount  could  be  realized  on  a 
call,  do  you?" 

Judge  FOLGER.  "Yes,  sir." 

Mr.  BLAISDELL.  "Let  it  be  called  then." 

Judge  FOLGER.  "At  what  date?" 

Mr.  BLAISDELL.  "At  the  end  of  the  fiscal  year." 

Addressing  then  the  accounting  officers,  Secretary  Folger  said: 

"Make  an  estimate  of  the  value  of  this  bond  with  the  interest  to 
accrue  to  that  date." 

It  was  made,  but  while  being  made  other  conversation  was  going 
on  between  the  Secretary  and  myself,  he  giving  rue  information  and 
instructions  to  guide  me. 

Receiving  the  paper  from  the  accounting  officers  on  which  the  esti- 
mate had  been  made,  he  remarked  with  apparent  surprise: 

"Why,  that  amounts  to  almost  as  much  as  the  sum  total  of  all  the 
original  bonds.  I  fear  that  if  so  much  is  called  at  one  time  there 
will  be  a  failure.  Could  you  not  extend  the  time  on  a  part  of  the 
payments?" 

"Certainly,"  I  said  "I  am  not  so  anxious  to  get  it  all  at  once  as  I  am 
to  at  once  get  good  security  for  the  whole.  Take  as  much  time  as  you 
desire  to  make  the  calls  in,  provided  only  that  we  hold  the  United 
States  securities  for  our  money  instead  of  Pacific  railroad  bonds." 

Judge  FOLGER.  "How  would  the  1st  of  January  next  (1885)  do?" 

"That  will  do,"  I  said.  "I  was  only  solicitous  to  get  the  job  off  my 
hands  and  into  yours,  and  the  only  care  that  I  have  is  to  see  that  the 
security  shall  pass  from  the  Pacific  railroads  to  the  United  States,  so 
that  I  shall  look  to  the  Government,  and  not  to  the  Pacific  railroads 
for  the  payment." 

The  accounting  officers,  at  this  stage  of  proceedings,  picked  up  their 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  415 

pencils  and  made  a  new  computation  of  interest,  adding  interest  to 
January  1,  1885. 

Judge  FOLGKER.  "But  you  must  remember  that  there  is  a  great  deal 
more  of  this  indebtedness  to  be  looked  after.  What  are  you  going  to 
do  with  the  balance  of  it;  that  of  the  other  roads?" 

Mr.  BLAISDELL.  "Well,  we  want  to  collect  it." 

Judge  FOLGER.  "  Should  there  be  an  attempt  to  collect  the  whole 
amount  due,  as  under  the  terms  of  the  forfeiture,  the  property  of  these 
corporations  would  fail  to  make  anything  near  the  amount  required, 
and  the  Government  would  get  absolutely  nothing.  I  would  like  to 
arrange  it  to  save  something  for  the  Government." 

Mr.  BLAISDELL.  "How  will  this  do.  Secure  to  us  the  entire  principal 
of  the  mortgages,  and  you  take  just  as  long  time  for  the  Government 
to  pay  the  accrued  interest  as  you  desire?" 

Judge  FOLGKER.  "I  will  fix  the  date  of  the  maturity  of  the  accrued 
interest  at  that  of  the  maturity  of  the  last  bond,  or  August  16,  1804. 
At  what  date  shall  we  begin  to  compute  the  interest  on  the  Pacific  rail- 
road interest  bonds?" 

Mr.  BLAISDELL.  "I  notice  you  said  that  the  last  payment  of  interest 
had  been  made  March  3,  1883.  Fix  it  at  that  date." 

Judge  FOLGER.  "Very  well.  Now  what  rate  of  interest  shall  this 
fund  bear?" 

Mr.  BLAISDELL.  *'  What  rate  of  interest  do  sinking-fund  bonds  now 
bear?" 

Judge  FOLGER.  "Five  per  cent  per  annum." 

Mr.  BLAISDELL.  "Will  you  make  it  5  per  cent?" 

Judge  FOLGER.  "I  think  we  can." 

"Do  that  then,"  said  I. 

Judge  FOLGER.  "Now  what  depository  do  you  propose  to  receive  the 
principal  in?" 

Mr.  BLAISDELL.  "New  York  City  subtreasury." 

Judge  FOLGER.  "Why  New  York  City;  why  not  Washington ?" 

Mr.  BLAISDELL.  "I  think  it  less  likely  to  get  mixed  up  with  other 
funds." 

Judge  FOLGER.  "Very  well,  that  will  do.  Now,  is  there  any  more 
interest  to  be  paid  by  the  corporations?" 

Mr.  BLAISDELL.  "No,  sir.  From  these  dates  they  will  all  be  excused 
from  the  payment  of  any  more  interest." 

Judge  FOLGER.  "  But  I  would  like  in  some  way  to  secure  to  the 
Government  some  more  net  earnings." 

Mr.  BLAISDELL.  "Well,  I  do  not  know  that  I  have  anything  to  do 
with  that." 

Judge  FOLGER.  "Not  directly,  but  indirectly  it  would  aid  the  Gov- 
ernment, if  you  make  a  demand  upon  the  Union  Pacific  for  the  whole 
of  its  net  earnings — as  a  matter  of  default — for  payment  of  interest." 

Mr.  BLAISDELL.  "Very  well,  you  can  fix  that  to  suit  the  case." 

Judge  FOLGER.  "  On  what  date  now  should  the  payment  of  all 
interest,  as  by  the  corporations,  cease?" 

Mr.  BLAISDELL.  "On  what  date  did  you  receive  the  last  interest?" 

Judge  FOLGER.  "March  3,  1883." 

Mr.  BLAISDELL.  "Let  it  cease  on  that  date,  then." 

To  this  proposition  Mr.  Folger  agreed. 

This  closed  the  transactions  and  the  conversation  with  me,  excepting 
that,  when  he  was  about  to  retire,  I  asked  him  what  I  should  have  to 
show  that  these  transactions  had  occurred.  Addressing  Judge  Law- 


416  GOVERNMENT    DEBT    OF    IrfE    PACIFIC    RAILKOADS. 

rence,  he  said:  "  You,  Judge,  will  see  to  it  that  Mr.  Blaisdell  is  sup- 
plied with  the  proper  certificate  of  ownership  of  these  bonds,  and  a  copy 
of  the  proceedings  and  transactions  between  himself  and  the  (Govern- 
ment, omitting  nothing  essential  to  the  protection  of  the  interests 
which  he  represents." 

Mr.  BLAISDELL  (to  Judge  Lawrence).  "When  shall  I  receive  these 
papers  and  certificates'?" 

Judge  LAWRENCE.  "Oh,  you  return  for  them  in  about  a  month.  I 
think  we  will  have  everything  ready  about  that  time." 

In  about  live  or  six  weeks  I  returned  to  Washington  again,  and  being 
accompanied  by  Hon.  J.  G.  Cannon,  made  a  personal  application  for 
the  papers  promised.  Judge  Lawrence  manifested  a  degree  of  indiffer- 
ence and  ignorance  on  the  subject  which  called  forth  from  Mr.  Cannon 
this  remark:  "Why,  Judge  Lawrence,  were  you  not  present,  and  know- 
ing to  all  that  transpired  in  the  interview  with  Mr.  Blaisdell  *?" 

Judge  Lawrence  replied :  "  Certainly  I  was;  but  you  know,  Mr.  Can- 
non, the  business  was  of  such  a  nature  that  it  was  not  proper  to  make 
it  the  subject  of  open  conversation,  and  you  see  that  this  room  is  filled 
with  promiscuous  people.  Let  Mr.  Blaisdell  come  in  in  the  afternoon, 
and  we  will  have  a  private  talk,  and  I  will  tell  him  all  about  it." 

Then  beckoning  with  his  hand  to  Joseph  A.  D.  Thompson,  Deputy 
First  Comptroller,  he  said:  "Go  with  these  gentlemen  and  introduce 
Mr.  Blaisdell  to  Mr.  William  Armstrong,  the  Commissioner  of  Kail- 
roads,  and  tell  that  officer  that  hereafter  it  will  be  his  duty  to  report 
Pacific  railroad  matters  and  accounts  to  Mr.  Blaisdell."  Mr.  Lawrence 
added,  as  instructions  to  Mr.  Armstrong,  "that  he  should  take  par- 
ticular pains  to  instruct  Mr.  Blaisdell  as  to  his  rights  and  prerogatives." 

Mr.  Armstrong  turned  to  those  pages  in  the  last  railroad  report 
wrhich  referred  more  especially  to  the  rights  and  privileges  of  holders  of 
liens  prior  and  paramount  to  that  of  the  United  States  and  recited  to 
me  the  text  important  to  my  protection.  Afterwards,  handing  me  the 
report,  he  said,  "You  are  entitled  to  this  report,  take  it  along." 

From  that  time  to  the  present,  all  Commissioners  of  Railroads  have 
continued  to  furnish  me  with  railroad  reports  as  they  have  been  pub- 
lished, and  have  uniformly  forwarded  them  to  my  address,  whether  at 
Champaign,  or  Chicago,  111. 

Although  satisfied  personally  with  the  treatment  received  from  Mr. 
Armstrong,  I  felt  disappointed,  and  returned  again  to  Judge  Lawrence, 
and  expressed  to  him  my  great  dissatisfaction  and  disappointment  in 
not  discovering  anything  in  the  reports  that  identified  the  late  Governor 
Durkee,  of  Utah,  with  any  of  the  matters  in  which,  by  reason  of  the 
transactions  of  April  2,  1884,  I  had  become  concerned  in  as  a  legal 
representative  for  lawful  creditors. 

I  insisted  that  Judge  Lawrence  should  so  far  comply  with  the  known 
order  of  Judge  Folger  (who  then  had  retired  on  account  of  sickness) 
as  to  deliver  to  me  certificates,  or  other  form  of  written  evidence,  that 
I  was  the  legal  representative  of  the  creditors  of  the  Government  in 
these  matters.  He  then  promised  me,  that  as  soon  as  the  terms  and 
agreements  made  with  respect  to  Pacific  railroads  in  the  matter  should 
have  been  fully  carried  into  effect,  and  accountings  fully  completed,  that 
he  would  supply  me  with  certified  copies  of  every  transaction  that  had 
occurred  in  the  matter  with  me. 

Accepting  this  promise  as  haying  been  made  in  good  faith,  I  then 
returned  to  my  home  in  Champaign,  111.  The  time  from  the  second  to 
the  third  visit  to  Washington  was  about  six  or  seven  months.  During 
this  timti  a  number  of  letters  passed  between  myself  and  the  Treasury 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  417 

Department.  Generally  my  letters  were  answered  in  person  by  Judge 
Lawrence.  The  answers  were  generally  brief,  and  uniformly  evasive  on 
every  question  of  vouchers  and  certificates. 

I  came  the  third  time  in  January,  1885;  waited  on  Senator  Cullom^ 
who  wrote  a  letter  of  introduction  to  the  Assistant  Secretary  of  the 
Treasury,  Jonathan  Tarbell,  requesting  such  officer  to  give  me  special 
attention  for  the  time  I  had  to  spend  with  him.  This  he  did,  and  we 
spent  the  entire  day  in  the  examination  of  large  bundles  of  papers 
brought  to  us  by  clerks,  with  the  view  of  selecting  the  most  important, 
and  of  finding,  if  practicable,  "  how  and  when  Pacific  railroad  bonds 
were  assigned  to  Charles  Durkee,  deceased,  and  the  papers  showing 
rights  of  his  heirs." 

The  result  was  disappointing  to  Mr.  Tarbell,  as  well  as  myself,  and 
he  proposed  to  continue  the  examination  the  next  day.  Owing,  how- 
ever, to  my  engagements  in  the  suit  that  had  been  placed  under  my 
management,  by  an  arrangement  with  the  Secretary  of  the  Treasury, 
that  was  still  pending  in  Chicago,  I  felt  compelled  to  return  and  trust 
the  further  investigation  to  Mr.  Tarbell,  who  promised  to  do  for  me  the 
best  he  could.  I  returned  that  night  to  Chicago. 

The  Secretary  of  State,  Mr.  Frelinghuysen,  however,  having  a  per- 
sonal knowledge  of  the  proceedings  of  the  Secretary  of  the  Treasury, 
April  22,  1884  (having  been  present),  voluntarily  prepared  some  State 
papers  to  be  used  in  the  case,  to  which  he  attached  the  great  seal  of 
State,  and  affixed  his  signature,  saying  that  the  purpose  of  so  doing  was 
to  enable  me  to  save  all  the  testimony  I  had  received,  and  to  attach 
thereunto  all  that  I  should  thereafter  receive,  in  testimony  of  the  trans- 
actions had  with  myself. 

It  was  mutually  agreed  between  myself,  Secretary  Frelinghuysen, 
and  Secretary  Tarbell  that  search  for  the  documents  should  continue 
after  I  should  leave,  and  that  as  fast  as  discovered,  they  should  be  for- 
warded to  me. 

There  were  a  few  more  documents  sent  me  after  this,  but  I  never 
received  the  certificate  of  ownership  of  the  bonds. 

W.  Blaisdell  dictated  to  the  stenographer  the  following  additional 
particulars : 

THE     ENTIRE     INDEBTEDNESS     EXPRESSED     IN    UNITED     STATES 

.  STATUTES. 

First.  The  first-mortgage  indebtedness  and  the  subsidy  indebtedness 
being  paid,  there  exists  no  further  liability  against  the  United  States. 

Second.  The  United  States  statutes  have  provided  and  the  Supreme 
Court  has  decided  that  there  is  but  one  class  of  creditors  with  higher 
claim  than  that  of  the  United  States.  (See  section  8  of  the  Thurman 
Act,  and  sections  4  and  5  of  the  act  of  March  3,  1887.) 

Third.  No  records  of  the  Government  show  any  other  claim  pur- 
porting to  be  a  paramount. lien  to  that  of  the  United  States  except  the 
claim  represented  by  L.  C.  Blaisdell. 

Fourth.  The  act  of  March  3,  1887,  is  a  complete  statutory  prepara- 
tion and  provision  directing  the  Secretary  of  the  Treasury  to  clear  off 
such  paramount  lien. 

If  the  parties  claiming  to  hold  paramount  lien  bonds  are  correct  in 
their  statements,  how  can  the  last  report  of  the  Secretary  of  the  Inte- 
rior be  correct? 

The  Secretary  of  the  Interior  says  that  all  these  bonds  are  now 
matured;  that  the  Government  holds  the  second  lien  and  must  protect 


418  GOVERNMENT    DEBT    OP    THE    PACIFIC    RAILROADS. 

the  property  against  the  first  lien.    And  the  statutes  declare  that  the 
United  States  has  but  one  lien  security — the  first  lien. 

See  act  of  May  7,  1878,  preamble,  pages  318  and  319,  section  3743  of 
the  Ee vised  Statutes : 

All  contracts  to  be  made  by  virtue  of  any  law  and  requiring  the  advance  of  money, 
or  in  any  manner  connected  with  the  settlement  of  public  accounts,  shall  be  depos- 
ited in  the  offices  of  the  First  Comptroller  of  the  Treasury  of  the  United  States,  the 
Second  Comptroller  of  the  Treasury  of  the  United  States,  or  the  Commissioner  of 
Customs,  respectively,  according  to  the  nature  thereof,  within  ninety  days  after 
their  respective  dates. 

Section  306,  Revised  Statutes  of  the  United  States,  on  liabilities  out- 
standing three  years  or  more,  provides : 

That  such  sums  as  shall  stand  to  the  credit  of  any  disbursing  officer  for  any  pur- 
pose, in  liquidation  of  an  indebtedness  due  to  the  United  States  which  have  for  three 
years  or  more  remained  outstanding,  unsatisfied,  and  unpaid  shall  be  deposited  by 
the  Treasurer  to  be  covered  into  the  Treasury  by  warrant,  and  to  be  credited  to  the 
credit  of  the  parties  in  whose  favor  such  certificates,  drafts,  or  checks  were,  respec- 
tively, issued,  or  to  the  persons  who  are  entitled  to  receive  pay  therefor,  and  into  an 
appropriation  account,  to  be  denominated  "  outstanding  liabilities." 

Secretary  Foster,  in  a  statement  made  to  one  of  the  Congressional 
committees,  said  that  it  has  been  the  practice  of  the  Treasury  Depart- 
ment to  treat  the  interest  accrued  on  the  paramount  lien  obligations  of 
the  said  Pacific  railroad  corporations  as  not  maturing  until  the  maturity 
of  the  last  one  of  the  bonds.  A  reference  to  the  reply  made  by  the 
Seriate  Judiciary  Committee,  which  examined  Mr.  Foster,  will  show,  as 
I  have  been  informed,  that  the  committee  held  to  the  opposite  view  and 
stated  that  the  obligation  of  the  Government  in  relation  to  payment  of 
interest  accrued  on  such  paramount  lien  should  date  from  the  time 
when  the  Government  assumed  the  direct  responsibility  of  payment  of 
the  bonds  of  such  lien,  to  be  determined  by  the  date  of  such  assumption. 

By  reference  to  the  act  of  March  3,  1887,  we  shall  see  that  in  that 
act  the  Secretary  of  the  Treasury  is  directed  to  satisfy  the  claims  of 
the  lawful  creditors  of  the  paramount  lien,  as  expressed  in  the  act  of 
May  7, 1878.  This  is  the  construction  which  the  claimants  place  on 
these  statutes  as  applied  to  their  rights.  The  legal  representative  of 
the  claimants  begs  leave  to  state  that,  had  this  been  done,  as  directed 
in  such  act,  it  would  have  been  a  saving  to  the  Government  of  all  the 
interest  which  has  accrued  in  the  period  of  nine  years  that  has  passed 
since  the  enactment  of  that  law.  And,  furthermore,  that  it  would  have 
been  to  the  advantage  of  the  Government,  in  this  respect,  that  it  would 
have  become  subrogated  to  the  rights  of  the  paramount  lien,  by  which 
all  the  property  of  the  branch  lines — worth  much  more  than  the  main 
lines — would  have  become  security  for  the  payment  of  the  Government 
interest.  This,  in  the  aggregate,  would  amount  to  a  saving  of  more 
than  $100,000,000. 

The  CHAIRMAN.  Is  there  anything  else  that  you  desire  to  add  to  your 
statement? 

Mr.  BLAISDELL.  I  have  nothing  more  to  offer  at  present.  Our  plan 
is  to  submit  the  statute  quotations,  when  we  can  be  questioned  by  mem- 
bers of  your  committee.  I  do  not  care  to  offer  anything  more  until  the 
committee  begins  its  interrogations. 

The  CHAIRMAN.  Have  you  citations  from  statutes'? 

Mr.  BLAISDELL.  In  abundance.  Anything  that  you  want  to  ask. 
We  have  them  already  printed,  and  will  put  them  in  the  record  if  the 
chairman  permits  us  to  do  so. 

The  CHAIRMAN.  You  may  hand  them  to  the  stenographer  and  have 
them  printed  in  the  proceedings  of  the  committee, 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  419 

The  following  papers  were  handed  in  by  Mr.  Blaisdell,  and  were 
ordered  to  be  printed : 

Case  18003.  In  Court  of  Chums.  L.  C.  Blaisdell  v.  The  United  States.  Application 
for  rule  on  the  Secretary  of  the  Treasury  to  show  cause  why  judgment  should  not 
be  entered  against  the  United  States,  and  in  favor  of  the  Petitioners  and  Claimants 
v.  The  United  States. 

[Final  statement  of  Case  18003.    In  Court  of  Claims.    L.  C.  Blaisdell  v.  The  United  States.] 

This  case  was  brought  before  the  honorable  court  through  the  intervention  of  the 
Committee  on  Claims  of  the  Fifty-fourth  Congress,  from  whose  files  it  will  appear 
that  the  plaintiff  had  been  duly  presented  by  a  Member  of  that  Congress,  the  Hon. 
Wuj.  M.  Springer,  of  the  State  of  Illinois. 

It  was  filed  in  the  first  instance  by  the  present  claimant,  L.  C.  Blaisdell,  in  behalf 
of  not  only  the  heirs  at.  law  of  the  decedent,  Charles  Durkee,  but  in  behalf  of  all 
creditors  of  the  lien  prior  and  paramount  to  that  of  the  United  States,  as  designated 
in  the  several  acts  of  Congress,  1864-1878,  and  of  the  act  of  March  3, 1887. 

Thus  it  appears  on  the  face  of  the  petition  that  it  was  a  claim  filed  and  founded 
upon  acts  of  Congress,  which  acts  were  in  the  petition  definitely  and  at  length  set 
forth  in  form  and  substance,  and  made  exhibits  for  the  purposes  of  conveying  to  the 
Hiiiid  of  the  court  the  foundation  upon  which  all  rights  claimed  by  the  complainants 
ill  the  case  were  to  be  ascertained.  The  rights  of  the  complainants,  whatever  they 
shall  be  ascertained  by  the  honorable  court  to  be  or  to  have  heretofore  been,  are  fully 
defined  in  the  Pacific  railroad  laws  set  up,  designated,  and  pleaded  in  the  preliminary 
and  informal  petition;  in  the  more  complete  petition  following  on  the  case  or  matter 
of  the  petition  being  by  the  court  taken  for  consideration  as  in  ex  parte;  and  must 
finally  appear,  not  necessarily  from  any  or  all  of  the  answers  of  the  several  Depart- 
ments, bureaus,  and  officers  of  the  Government,  the  information  thereby  convoyed  to 
the  court,  but  through  the  information  conveyed  to  the  mind  of  the  court  through 
statutes  of  the  United  States,  and  specific  acts  of  Congress  defining  the  particular 
rights  and  character  of  rights  set  up  and  appearing  in  this  petition. 

It  will  only  be  necessary  to  merely  call  the  attention  of  this  honorable  court  to 
the  acts  of  Congress  that  have  been  duly  presented  to  it  as  the  authority  for  bring- 
ing this  claim  against  the  United  States — to  complete  all  the  testimony  in  support 
of  the  claim  herein  presented — that  can  be  required  of  the  complainants  in  the  case 
to  present. 

The  information  that  has  been  filed  with  this  honorable  court  by  the  attorney  of 
record  in  the  case — and  that  particular  portion  of  it  which  classifies  as  ''official 
matter,"  certified  by  the  several  Departments,  Bureaus,  and  officers  of  the  Govern- 
ment— disclose  a  state  of  facts  which  precludes  the  possibility  of  there  being  here- 
after, at  any  time,  by  or  through  any  Department,  Bureau,  or  officer  of  the  Govern- 
ment, a  state  of  facts  to  it  presented  that  shall  run  counter  to  or  in  any  material 
form  modify  the  conclusions  which  the  court  may  draw  from  that  which  has  been 
already  thus  presented. 

A  summary  of  these  facts  thus  presented,  and  that  have  been  on  file  with  this 
honorable  court  for  the  greater  part  of  the  two  years  last  preceding  the  present  date, 
shows  to  the  honorable  court  all  the  essential  information  necessary  that  it  shall 
have  obtained  before  proceeding  to  enter  final  judgment  in  the  cause  of  the  com- 
plainants versus  the  United  States. 

As  they  embrace  a  large  part  of  the  history  of  the  Pacific  railroad  system,  their 
operations,  duties,  and  obligations  were  as  expressed  in  the  United  States  Statutes; 
and  so  great  a  portion  of  the  detailed  information  is  to  be  conveyed  to  the  court 
through  official  reports  of  the  Auditor  of  Railroad  Accounts  in  the  first  instance 
(and  Railroad  Commissioners'  reports  in  the  latter  instances),  it  is  deemed  in  order 
to  present  first  the  annual  report  of  the  Auditor  of  Railroad  Accounts  to  the  Secre- 
tary of  the  Interior  for  the  year  ending  June  30,  1878. 

On  page  6  of  this  report  occur  the  words : 

"  The  act  of  Congress  approved  May  7, 1878  (chap.  96,  p.  56,  20  Stat.  L.,  1877-78),  enti- 
tled 'An  act  to  alter  and  amend  the  act  entitled  "An  act  to  aid  in  the  construction  of 
a  railroad  and  telegraph  line  from  the  Missouri  River  to  the  Pacific  Ocean,  *  *  * 
approved  1862/"  f  and  "to  alter  and  amend  act  of  1864,"  in  amendment  of 

said  first-named  act,  requires : 

"That  the  net  earnings  mentioned  in  said  act  of  1862  of  said  railroad  companies, 
respectively,  the  Central  Pacific  Railroad  Company  of  California  and  the  Union 
Pacific  Railroad  Company,  shall  be  ascertained  by  deducting  from  the  gross  amount 
of  their  earnings,  respectively,  the  necessary  expenses  paid  within  the  year  in  operat- 
ing the  same  and  keeping  the  same  in  a  state  of  repair,  and  also  the  sum  paid  by 
them,  respectively,  within  the  year  in  discharge  of  interest  on  their  first-mortgage 
bonds." 


420  GOVERNMENT    DEBT   OF    THE    PACIFIC    RAILROADS. 

On  the  first  proposition,  to  wit,  the  amount  paid  by  those  companies  "within  any 
given  year  in  operating  their  railroad  and  telegraph  lines  and  in  keeping  the  same  in 
a  state  of  repair,"  it  is  not  proposed  to  make  any  remarks.  lint  the  second  proposi- 
tion, namely,  "with  the  amount  paid  by  them,  respectively,  within  the  year  or  at 
any  other  time,  in  discharge  of  interest  on  their  lirst-uiortgage  bonds,"  with  this 
proposition  wo  do  propose  to  deal. 

It  is  made  the  basis  of  the  rights  set  up  by  the  complainants  against  the  United 
States  that  the  interest  accrued  upon  these  first-mortgage  bonds,  to  wit: 

Union  Pacific $27,236,512 

Central  Pacific 25,885,120 

Denver  Pacific  Railroad  and  Telegraph  Company  (Western  Pacific) 1, 970,  560 

Kansas  Pacific 1,  600,  000 

Central  Branch  Union  Pacific  Railroad  Company 1, 600,  000 

Sioux  City  and  Pacific  Railroad  Company 1,  628, 320 

A  total  first-mortgage  debt  and  indebtedness  lien  prior  and  paramount  to  that  of 
the  United  States  of  $61,623,512,  with  interest  accrued  thereon  at  tlie  rate  of  6  per 
cent  per  annum,  was,  until  the  dates,  respectively,  March  3,  A.  D.  1883,  and  Janu- 
ary 1,  A.  D.  1885,  the  debt  and  the  expressed  indebtedness  of  these  railroad  and 
telegraph  companies,  jointly  and  severally,  to  such  parties  and  persons  as  were 
expressed  and  designated  in  "  certain  files  and  records  of  the  Treasury  Department,7' 
and  which  were  referred  to  in  these  terms  by  Hon.  William  Lawrence,  First  Comp- 
troller of  the  Treasury,  in  Comptroller's  decision  by  said  William  Lawrence,  under 
the  date  of  December  3,  A.  D.  1884,  and  at  such  date  became,  by  contract,  an 
indebtedness  of  the  United  States. 

That  the  names  of  "the  lawful  and  just  holders  of"  the  said  "lien  prior  and  para- 
mount to  that  of  the  United  States"  have  not  appeared  of  record  within  the  knowl- 
edge of  this  honorable  court,  and  have  never  yet  been  produced  (so  far  as  known) 
before  any  committee  of  either  House  of  Congress  nor  reported  in  any  railroad 
report  required  by  law  to  have  contained  them,  constitutes  110  evidence  and  no 
rebuttal  of  the  testimony  that  first  mortgage  creditors  answering  to  that  description 
do  not  exist,  for  we  can  not  consistently  believe  that  when  such  mortgages  of  such 
description  and  of  such  character  of  lien  have  been  so  well  provided  with  protec- 
tion in  the  expressed  provisions  of  the  acts  of  Congress— 1864,  1878,  and  1887 — that 
the  very  "liens"  or  incumbrancos  thus  openly  recognized  by  such  acts  of  Congress 
could  exist  independently  of  an  expressed  ownership  of  such  character  of  mort- 
gages in  the  Department  of  the  Treasury  and  the  Department  of  the  Interior,  both 
of  which  said  Departments  contain  the  most  conclusive  evidence  and  recorded 
proofs  that  such  bonds  do  exist. 

The  Departments  just  named  have,  it  is  true,  failed  to  produce  the  "evidence" 
called  for  by  the  complainants  in  the  first  instance,  and  by  the  honorable  court  in  the 
second  instance,  that  such  mortgage  bonds  do  exist;  but  these  a«ts  of  Congress  just 
referred  to,  more  especially  the  preamble  to  the  act  of  May  1,  1878,  declare  that  the 
Union  Pacific  Railroad  Company  named  in  this  and  the  other  said  acts  of  Congress, 
and  the  Central  Pacific  Railroad  Company  and  others  therein  named,  "did  and  have 
issued"  an  amount  of  "their  own  bonds"  equal  to  the  amount  so  issued  (as  therein 
expressed)  to  them,  and  each  of  them,  by  the  United  States. 

Furthermore,  rights  of  owners  of  bonds  thus  issued  are  not,  in  law  or  equity,  to 
be  defeated  by  the  neglect  and  refusal  of  the  said  several  Departments,  or  any  offi- 
cer, bureaus,  or  heads  of  such  Departments  to  make  and  preserve  proper  "files  and 
records"  of  the  various  transactions  that  may  have  occurred  in  either  one. 

In  pleading  for  the  protection  of  the  rights  of  this  class  of  creditors  of  the  United 
States,  I  shall  submit  for  the  consideration  of  the  honorable  court  the  general  prop- 
osition that  rights  thus  guaranteed  by  acts  of  Congress  are  not  to  be  defeated  by 
"the  neglect  and  refusal  of  officers  of  the  Government  (more particularly  the  heads 
of  the  two  Departments  last  named)  to  keep,  preserve  for  the  use  of  this  court,  and 
to  present  the  true  and  perfect  record  of  such  transactions  occurring  therein  as  have 
involved  the  credit  of  the  United  States  to  the  total  amount  named  in  the  said  Pacific 
Railroad  bonds." 

The  truth  of  this  last  proposition,  I  believe,  is  not  questioned  by  any  head  of  any 
Department  of  the  Government,  so  far  as  I  have  yet  been  informed,  to  wit,  the  rec- 
ords of  the  Treasury  Department  do  disclose  the  "public  debt  statement;  that  all 
interest  accrued  upon  the  said  bonds  are  payable  by  the  United  States."  To  whom 
payable  is  not  disclosed.  That  the  principal  of  the  bonds  ($64,623,512)  is  also 
"payable  by  the  United  States."  To  whom  payable  is  not  disclosed. 

Nor  is  it  disclosed  (by  record  or  information  to  Congress  given)  when,  in  the  his- 
tory of  these  bonds,  that  portion  of  them  became  due  and  payable  which  represented 
"interest  indebtedness  accrued  for  the  period  of  time  which  intervened  between 
issue  of  the  principal  bonds  and  the  date  of  April  22,  1884."  The  plaintiff  in  the 
case  has  alleged  the  fact  of  the  transposition  of  a  specific  and  well-defined  and 
expressed  indebtedness  of  these  corporations  into  an  indebtedness  of  the  United 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  421 

States.  The  Treasury  Department  corroborates  the  fact  stated,  that  such  indebted- 
ness has  become  the  indebtedness  of  the  United  States,  but  does  not  show  when  ifc 
so  became  (debt  payable  by  the  United  States). 

The  Interior  (Railroad  Department  thereof)  carries  the  same  debt  account  under 
the  title  or  name  of  "  Bond  indebtedness,"  and  charges  the  same  item  against  the 
United  States  as  such,  which  the  Treasury  Department  terms  a  cash  and  "sinking- 
fund  indebtedness."  The  information  is  thus  disclosed  to  the  honorable  court  that 
there  is  avast  discrepancy  between  the  "public  debt  statement"  of  the  Secretary  of 
the  Treasury  and  that  disclosed  in  the  Department  of  the  Interior.  The  sinking  innd, 
as  shown  by  the  Commissioner  of  Railroads,  does  not  show  to  exceed  $27,000,000 
(less  than  $20,000,000  in  1884),  while  the  Treasury  Department  (nnless  the  Pacific 
Railroad  Committee  under  Mr.  Outhwaite  have  misstated)  shows  $64,000,000  of 
"sinking-fund  indebtedness  of  the  Government/'  by  reason  of  these  Pacific  railroad 
obligations,  in  addition  to  that  shown  in  the  Department  of  the  Interior. 

To  prove  that  there  is  a  gigantic  discrepancy  and  erroneous  statement  of  the  pub- 
lic liabilities  in  this  respect,  as  between  these  two  departments  the  honorable  court 
has  but  to  summons  Mr.  Outhwaite  as  witness,  who,  with  thirteen  other  members  of 
that  committee  (in  1888),  declared  "that  the  amount  of  $64,623,512  in  cash"  was,  on 
the  1st  day  of  January,  1885,  an  "outstanding  liability"  of  the  Government  by 
reason  of  the  amount  of  cash  having  been,  on  that  date,  deposited  with  the  Secre- 
tary of  the  Treasury  "for  the  definitely  ascertained  indebtedness  of  the  several 
Pacific  railroad  companies  to  their  lawful  creditors"  of  the  lien  prior  and  paramount 
to  that  of  the  United  States. 

If  the  liability  of  the  United  States,  or  my  statement  of  its  liability  in  this  respect, 
and  as  alleged  in  my  petition,  both  the  original  and  amended,  has  been  disputed  by 
any  answer,  plea,  or  demurrer  filed  with  this  honorable  court,  I  am  as  yet  not  made 
aware  of  the  fact.  The  statement  has  gone  before  the  Department  of  the  Treasury, 
signed  and  sworn  to  as  sot  forth  in  my  affidavits,  and  stands  unchallenged  so  far  as 
I  know. 

The  order  of  the  court  for  the  information  that  would  deny  the  truth  of  the  state- 
ment has  gone  forth,  and  does  not  bring  the  information  that  would  deny  it. 

The  statement  has  stood  in  form  and  in  print  before  the  eyes  of  every  Secretary  of 
the  Treasury  from  the  date  of  January  12,  1889,  and  not  one  has  attempted  to  deny 
it  or  make  any  official  answer  tending  to  deny  the  truth,  substantially,  of  my  state- 
ments, as  in  petition  contained.  The  President  of  the  United  States  (Benjamin  Har- 
rison, while  Chief  Executive)  caused  all  my  statements  to  be  placed  before  himself, 
in  official  capacity,  and  in  official  capacity  referred  them  "for  the  official  action" 
(note  the  words)  of  the  Secretary  of  the  Treasury.  The  Supreme  Court,  in  99  United 
States  Reports,  supports  the  statement  of  my  petition,  that  the  United  States  is 
debtor  to  the  "  sinking  fund"  and  in  favor  of  "the  lawful  and  just  holders  of  para- 
mount lien,"  as  stated,  "to  the  full  amount  of  the  deposits  made  under  the  provisions 
of  such  sinking  fund  as  contained  in  the  act  of  May  7,  1878."  The  committee 
referred  to  last  has  the  information  that  the  sum  of  $64,023,512  is  and  has  been  with- 
held from  the  "possession  of  the  lawful  and  just  holders  of  such  paramount  lien, 
by  each  and  every  Secretary  of  the  Treasury,  on  the  plea,  or  notion,  rather,  that  such 
officer  held  a  discretionary  authority  to  make  of  such  fund  a  sinking  fund." 

Congress,  by  act  of  March  3,  1887,  directed  that  officer  "to  clear  off  such  para- 
mount lien  or  incumbrance  by  payments  (by  payments,  mark  the  words,  out  of  the 
sinking  fund  and  provided  that  the  entire  amount  be  paid,  whether  the  sinking  fund 
was  more  or  less  than  the  amount  due  to  the  lawful  owners  of  such  bonds,  or  the 
"lawful  creditors  of  the  paramount  lien  aforesaid." 

For  this  disobedience  of  the  requirement — the  direct,  positive,  and  special  order  of 
Congress — the  present  incumbent  in  that  office  is  answerable.  He  can  not  and  does 
not  answer  either  Congress  or  this  honorable  court  that  he  knows  not  the  lawful 
creditors  of  the  United  States;  that  he  has  no  legal  knowledge  of  them  that  he  is 
bound  by  law  to  take  cognizance  of. 

He  appears  to  rest  contentedly  upon  "want  of  information,  such  information  as 
would  create  an  official  liability  on  his  part  to  answer"  the  demands  made  by  me  on 
the  United  States  Treasury.  He  acts,  or,  rather,  neglects  to  act;  and  rests  upon  the 
assumption  that  his  neglect  and  refusal  to  answer  me  in  official  manner,  either  by 
affirmation  or  by  denial  of  the  claims  I  have  filed,  prevents  the  consummation  of  my 
purpose  to  enforce  an  accounting  from  him;  and  he  acts  as  if  he  expected  that  the 
entire  body  of  Congress  and  the  Supreme  Court,  including  this  honorable  court, 
would  unitedly  be  unable  to  compel  him  either  to  affirm  or  deny  my  right  to  an 
accounting,  and  thus  prevent  not  only  myself  and  my  clients  from  obtaining  the 
benefits  of  those  acts  of  Congress  upon  which  we  rely  for  protection,  but  that  all 
possible  creditors  of  such  lien,  as  Congress  provided  should  be  secured  to  "  its  lawful 
holders"  (should  others  than  myself  and  clients  proved  to  be  the  "lawful  benefi- 
ciaries"), would  be  powerless  and  the  courts  named  and  Congress  itself  be  powerless 
to  enforce  against  his  will  the  payment  of  the  sums  duo. 

With  these  statements  I  have  concluded  to  include  the  following  motion :  That  the 


422 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


Secretary  of  the  Treasury  be,  and,  with  the  approval  of  this  honorable  court,  is 
hereby  ordered  to  show  cause,  by  his  personal  appearance  before  this  honorable  court, 
at  the  next  ensuing  rule  day,  why  judgment  should  not  be  rendered  in  behalf  of  the 
United  States  for  the  benefit  of  the  petitioners  and  claimants  in  said  case  and  cause, 
No.  18003,  in  accordance  with  the  statement  of  claims  agaiunt  the  United  States  made 
to  this  honorable  court. 

Very  respectfully  submitted  by  , 

Attorney  of  Record  in  Case  No.  1800?,. 

To  the  Honorable  Chief  Justice  and  Judges  thereof. 


Supplemental  to  the  Revised  Statutes  of  the  United  States,  vol.  1,  1S74-1S81. 

AN  ACT  to  alter  and  amend  the  Act  entitled  "An  act  to  aid  in  the  construction  of  a  railroad  and  tele- 
graph line  from  the  Missouri  J  liver  to  the  Pacitic  Ocean,  and  to  secure  to  the  Government  the  use 
of  the  same  for  postal,  military,  and  other  purposes,"  approved  .Inly  first,  eighteen  hundred  and 
sixty-two,  and  also  to  alter  and  amend  the  act  of  Congress  approved  July  second,  eighteen  hundred 
and  sixty-four,  in  amendment  of  said  first-named  act. 


SECTION. 

Pacific  Railways. 

1.  Net  earnings,  how  ascertained. 

2.  Compensation  due  from  United  States  to  be 

retained ;  how  applied. 

3.  Sinking  fund. 

4.  Credits  to  and  payments  into  fund. 

5.  Secretary  of  Treasury  to  remit  into  sinking- 

fund  percentage  on'net  earnings. 

6.  No  dividend  to  be  voted,    &c.,   in   case  of 

default. 

Liability  of  officers  to  repay  dividends  ille- 
gally made. 

Penalty  on  officers,  &c.,  for  voting,  &c.,  to 
pay  illegal  dividends. 


SECTION  . 

7.  Application  of  sinking  fund. 

8.  Priorities  in  application  of  sinking  fund. 

9.  Liabilities   to  United   States   constitutes  a 

lien  on  property  of  companies. 
Companies  not  prevented  from  disposing  of 
property  in  ordinary  manner. 

10.  Enforcement  of  rights  of  United  States. 

11.  Forfeiture  of  franchises  on  failure  to  comply 

with  this  act. 

12.  This  and  former  acts  subject  to  alteration, 

repeal,  &c. 
Existing  remedies  not  affected. 

13.  This  act  deemed  as  amending  former  acts. 


PREAMBLE. 

Whereas  on  the  first  day  of  July,  Anno  Domini  eighteen  hundred  and  sixty  two, 
Congress  passed  an  act  entitled  "An  act  to  aid  in  the  construction  of  a  railroad  and 
telegraph  line  from  the  Missouri  River  to  the  Pacific  Ocean,  and  to  secure  to  the 
Government  the  use  of  the  same  for  postal,  military,  and  other  purposes;"  and 

Whereas  afterward,  on  tho  second  day  of  July,  Anno  Domini  eighteen  hundred 
and  sixty-four,  Congress  passed  an  act  in  amendment  of  said  first-mentioned  act;  and 

Whereas  the  Union  Pacific  Railroad  Company,  named  in  jaid  acts,  and  under  the 
authority  thereof,  undertook  to  construct  a  railway  after  the  passage  thereof,  over 
some  part  of  the  line  mentioned  in  said  acts;  and 

Whereas,  under  the  authority  of  the  said  two  acts,  the  Central  Pacific  Railroad 
Company  of  California,  a  corporation  existing  under  the  laws  of  the  State  of  Califor- 
nia,  under  took  to  construct  a  railway,  after  the  passage  of  said  acts,  over  some  part 
of  the  line  mentioned  in  said  acts;  and 

Whereas  the  United  States,  upon  demand  of  said  Central  Pacific  Railroad  Com- 
pany, have  heretofore  issued,  by  way  of  loan  and  as  provided  in  said  acts,  to  and  for 
the  benefit  of  said  company,  in  aid  of  the  purposes  named  in  said  acts,  the  bonds  of 
the  United  States,  payable  in  thirty  years  from  the  date  thereof,  with  interest  at  six 
per  centum  per  annum,  payable  half  yearly  to  the  amount  of  twenty-five  million 
eight  hundred  and  eighty-five  thousand  one  hundred  and  twenty  dollars,  which  said 
bonds  have  been  sold  in  the  market  or  otherwise  disposed  of  by  said  company;  and 

Whereas  the  said  Central  Pacific  Railroad  Company  has  issued  and  disposed  of  an 
amount  of  its  own  bonds  equal  to  the  amount  so  issued  by  the  United  States,  and 
secured  the  same  by  mortgage,  and  which  are,  if  lawfully  issued  and  disposed  of,  a 
prior  and  paramount  lien,  in  the  respect  mentioned  in  said  acts,  to  that  of  the  United 
States,  as  stated,  and  secured  thereby;  and 

Whereas,  after  the  passage  of  said  acts,  the  Western  Pacific  Railroad  Company,  a  cor- 
poration existing  under  the  laws  of  the  State  of  California,  did,  underthe  authority  of 
Congress,  become  the  assignee  of  the  rights,  duties  and  obligations  of  the  said  Cen- 
tral Pacific  Railroad  Company,  as  provided  in  the  act  of  Congress  passed  on  the  third 
day  of  March,  Anno  Domini  eighteen  hundred  and  sixty-five,  and  did,  under  the 
authority  of  said  act  and  of  the  acts  aforesaid,  construct  a  railway  from  the  city  of 
San  Jose  to  the  city  of  Sacramento,  in  California,  and  did  demand  and  receive  from 
the  United  States  the  sum  of  one  million  nine  hundred  and  seventy  thousand  five 
hundred  and  sixty  dollars  of  the  bonds  of  the  United  States  of  the  description  before 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  423 

mentioned  as  issued  to  the  Central  Pacific  Railroad  Company,  and  in  the  same  man- 
ner and  under  the  provisions  of  said  acts;  and  upon  and  in  respect  of  the  bonds  so 
issued  to  both  said  companies,  the  United  States  have  paid  in  interest  to  the  sum  of 
more  than  thirteen  and  one-half  million  dollars,  which  has  not  been  reimbursed ;  and 

Whereas  said  Western  Pacific  Railroad  Company  has  issued  and  disposed  of  an 
amount  of  its  own  bonds  eqiial  to  the  amount  so  issued  by  the  United  States  to  it, 
and  secured  the  same  by  mortgage,  which  are,  if  lawfully  issued  and  disposed  of,  a 
prior  and  paramount  lien  to  that  of  the  United  States,  as  stated,  and  secured 
thereby;  and 

Whereas  said  Western  Pacific  Railroad  Company  has  since  become  merged  in,  and 
consolidated  with,  said  Central  Pacific  Railroad  Company,  under  the  name  of  the 
Central  Pacific  Railroad  Company,  whereby  the  said  Central  Pacific  Railroad  Com- 
pany has  become  liable  to  all  the  burdens,  duties  and  obligations  before  resting  upon 
said  Western  Pacific  Railroad  Company ;  and  divers  other  railroad  companies  have 
become  merged  in  and  consolidated  with  said  Central  Pacific  Railroad  Company ;  and 

Whereas  the  United  States,  upon  the  demand  of  the  said  Union  Pacific  Railroad 
Company,  have  heretofore  issued  by  way  of  loan  to  it,  as  provided  in  said  acts,  the 
bonds  of  the  United  States,  payable  in  thirty  years  from  the  date  thereof,  with  inter- 
est at  six  per  centum  per  annum,  payable  half  yearly,  the  principal  sums  of  which 
amount  to  twenty-seven  million  two  hundred  and  thirty-six  thousand  five  hundred 
and  twelve  dollars;  on  which  the  United  States  have  paid  over  ten  million  dollars 
interest  over  and  above  all  reimbursements;  which  said  bonds  have  been  sold  in  the 
market  or  otherwise  disposed  of  by  said  corporation;  and 

Whereas  said  corporation  has  issued  and  disposed  of  an  amount  of  its  own  bonds 
equal  to  the  amounts  so  issued  to  it  by  the  United  States  as  aforesaid,  and  secured 
the  same  by  mortgage,  and  which  are,  if  lawfully  disposed  of,  a  prior  and  paramount 
lien,  in  the  respect  mentioned  in  said  acts,  to  that  of  the  United  States,  as  stated, 
and  secured  thereby ;  and 

Whereas  the  total  liabilities  (exclusive  of  interest  to  accrue)  to  all  creditors, 
including  the  United  States,  of  said  Central  Pacific  Railroad  Company,  amount  in 
the  aggregate  to  more  than  ninety-six  million  dollars,  and  those  of  the  Union  Pacific 
Railroad  Company  to  more  than  eighty-eight  million  dollars;  and 

Whereas  the  United  States,  in  view  of  the  indebtedness  and  operations  of  the  said 
several  railroad  companies  respectively,  and  of  the  disposition  of  their  respective 
incomes,  are  not,  and  cannot,  without  further  legislation,  be  secure  in  their  interests 
in  and  concerning  said  respective  railroads  and  corporations,  either  as  mentioned  in 
said  acts  or  otherwise ;  and 

Whereas  a  due  regard  to  the  rights  of  said  several  companies  respectively,  as 
mentioned  in  said  act  of  eighteen  hundred  and  sixty-two,  as  well  as  just  security  to 
the  United  States  in  the  premises,  and  in  respect  of  all  matters  set  forth  in  said  act, 
require  that  the  said  act  of  eighteen  hundred  and  sixty-two  be  altered  and  amended 
as  hereinafter  enacted;  and 

Whereas,  by  reason  of  the  premises  also,  as  well  as  for  other  causes  of  public  good 
and  justice,  the  powers  provided  and  reserved  in  said  act  of  eighteen  hundred  and 
sixty-four  for  the  amendment  and  alteration  thereof  ought  also  to  be  exercised  as 
hereinafter  enacted.  Therefore,  be  it  enacted,  &c. 

SECTION  1.  That  the  net  earnings  mentioned  in  said  act  of  eighteen  hundred  and 
sixty-two,  of  said  railroad  companies  respectively,  shall  be  ascertained  by  deducting 
from  the  gross  amount  of  their  earnings  respectively  the  necessary  expenses  actu- 
ally paid  within  the  year  in  operating  the  same  and  keeping  the  same  in  a  state  of 
repair,  and  also  the  sum  paid  by  them  respectively  within  the  year  in  discharge  of 
interest  on  their  first  mortgage  bonds,  whose  lien  has  priority  over  the  lien  of  the 
United  States,  and  excluding  from  consideration  all  sums  owing  or  paid  by  said  com- 
panies respectively  for  interest  upon  any  other  portion  of  their  indebtedness. 

And  the  foregoing  provision  shall  be  deemed  and  taken  as  an  amendment  of  said 
act  of  eighteen  hundred  and  sixty-four,  as  well  as  of  eighteen  hundred  and  sixty-two. 

This  section  shall  take  effect  on  the  thirtieth  day  of  June  next,  and  be  applicable 
to  all  computations  of  net  earnings  thereafter;  but  it  shall  not  affect  any  right  of 
the  United  States  or  of  either  of  said  railroad  companies  existing  prior  thereto. 

SEC.  2.  That  the  whole  amount  of  compensation  which  may,  from  time  to  t<me, 
be  due  to  said  several  railroad  companies  respectively  for  services  rendered  for  the 
Government  shall  be  retained  by  the  United  States,  one-half  thereof  to  be  presently 
applied  to  the  liquidation  of  the  interest  paid  and  to  be  paid  by  the  United  States 
upon  the  bonds  so  issued  by  it  as  aforesaid,  to  each  of  said  corporations  severally, 
and  the  other  half  thereof  to  be  turned  into  the  sinking-fund  hereinafter  provided 
for  the  uses  therein  mentioned. 

SEC.  3.  That  there  shall  be  established  in  the  treasury  of  the  United  States  a 
sinking-fund,  which  shall  be  invested  by  the  Secretary  of  the  Treasury  in  bonds  of 
the  United  States;  and  the  semi-annual  income  thereof  shall  in  like  manner,  from 
time  to  time,  be  invested,  and  the  same  shall  accumulate  and  be  disposed  of  as  here- 


424  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

inafter  mentioned.  And  in  making  such  investments  the  secretary  shall  prefer  the 
five  per  centum  bonds  of  the  United  States,  unless,  for  good  reasons  appearing  to 
him,  and  which  he  shall  report  to  Congress,  he  shall  at  any  time  deem  it  advisable 
to  invest  in  other  bonds  of  the  United  States. 

All  the  bonds  belonging  to  said  funds  shall,  as  fast  as  they  shall  be  obtained,  be 
so  stamped  as  to  show  that  they  belong  to  said  fund,  and  that  they  are  not  good  in 
the  hands  of  other  holders  than  the  Secretary  of  the  Treasury  until  they  shall  have 
been  endorsed  by  him,  and  publicly  disposed  of  pursuant  to 'this  act. 

SEC.  4.  That  there  shall  be  carried  to  the  credit  of  the  said  fund,  on  the  first  day 
of  February  in  each  year,  the  one-half  of  the  compensation  for  services  hereinbefore 
named,  rendered  for  the  Government  by  said  Central  Pacific  Railroad  Company,  not 
applied  in  liquidation  of  interest;  and,  in  addition  thereto,  the  said  company  shall, 
on  said  day  in  each  year,  pay  into  the  treasury,  to  the  credit  of  said  sinking-fund, 
the  sum  of  one  million  two  hundred  thousand  dollars,  or  so  much  thereof  as  shall  be 
necessary  to  make  the  five  per  centum  of  the  net  earnings  of  its  said  road  payable 
to  the  United  States  under  said  act  of  eighteen  hundred  and  sixty-two,  anil  the 
whole  sum  earned  by  it  as  compensation  for  services  rendered  for  the  United  States, 
together  with  the  sum  by  this  section  required  to  be  paid,  amount  in  the  aggregate 
to  twenty-five  per  centum  of  the  whole  net  earnings  of  said  railroad  company,  ascer- 
tained and  defined  as  hereinbefore  provided,  for  the  year  ending  on  the  thirty-first 
day  of  December  next  preceding. 

That  there  shall  be  carried  to  the  credit  of  the  said  fund,  on  the  first  day  of  Feb- 
ruary in  each  year,  the  one-half  of  the  compensation  for  services  hereinbefore  named, 
rendered  for  the  Government  by  said  Union  Pacific  Railroad  Company,  not  applied 
in  liquidation  of  interest ;  and,  in  addition  thereto,  the  said  company  shall,  on  said 
day  in  each  year,  pay  into  the  Treasury,  to  the  credit  of  said  sinking-fund,  the  sum 
of  eight  hundred  and  fifty  thousand  dollars,  or  so  much  thereof  as  shall  be  necessary 
to  make  the  five  per  centum  of  the  net  earnings  of  its  said  road  payable  to  the  United 
States  under  said  act  of  eighteen  hundred  and  sixty-two,  and  the  whole  sum  earned 
by  it  as  compensation  for  services  rendered  for  the  United  States,  together  with  the 
sum  by  this  section  required  to  be  paid,  amount  in  the  aggregate  to  twenty-five  per 
centum  of  the  whole  net  earnings  of  said  railroad  company,  ascertained  and  defined 
as  hereinbefore  provided,  for  the  year  ending  on  the  thirty-first  day  of  December 
next  preceding. 

SEC.  5.  That  whenever  it  shall  be  made  satisfactorily  to  appear  to  the  Secretary 
of  the  Treasury,  by  either  of  said  companies,  that  seventy -five  per  centum  of  its  net 
earnings  as  hereinbefore  defined  for  any  current  year  are,  or  were  insufficient  to  pay 
the  interest  for  such  year  upon  the  obligations  of  such  company  in  respect  of  which 
obligations  there  may  exist  (see  act  March  3rd,  1887,)  a  lien  paramount  to  that  of 
the  United  States  and  that  such  interest  has  been  paid  out  of  such  net  earnings, 
said  Secretary  of  the  Treasury  is  hereby  authorized,  and  it  is  made  his  duty,  to 
remit  for  such  current  year  so  much  of  the  twenty-five  per  centum  of  net  earnings 
required  to  be  paid  into  the  said  sinking-fund,  as  aforesaid,  as  may  have  been  thus 
applied  and  used  in  the  payment  of  interest  as  aforesaid.  (Note:  For  example,  if 
the  sum  of  19  million  dollars  shall  appear  to  the  satisfaction  of  the  Secretary  of 
Treasury  as  having  been  applied  by  the  corporation  to  the  liquidation  of  "interest 
accrued  on  mortgages  of  the  paramount  lien,"  it  is  the  duty  of  said  officer  of  the 
Government  to  remit  an  equal  amount  of  the  sums  due  to  the  United  States  on  sub- 
sidy debt,  from  said  corporations;  which  would  in  practice,  eliminate  the  entire 
subsidy  debt,  when  the  whole  amount  due  to  the  United  States  should  be  covered  by 
the  equal  sums  paid  in  interest  upon  the  bonds  whose  lien  are  paramount  to  that  of 
the  United  States.) 

SEC.  6.  That  no  dividend  shall  be  voted,  made,  or  paid  for  or  to  any  stockholder 
or  stockholders  in  either  of  said  companies  respectively  at  any  time  when  the  said 
company  shall  be  in  default  in  respect  of  the  payment  of  either  the  sums  required 
as  aforesaid  to  be  paid  into  said  sinking-fund,  or  in  respect  of  the  payment  of  the 
said  five  per  centum  of  the  net  earnings,  or  in  respect  of  the  interest  upon  any  debt 
the  lien  of  which,  or  of  the  debt  on  which  it  may  accrue,  is  paramount  to  that  of 
the  United  States.  (This  prohibits  and  makes  unlawful  the  dividends,  and  all  dis- 
tributions constituting  in  effect  dividends  to  stockholders,  or  to  persons  acting  in 
trust  for  stockholders,  for  no  interest  appears  (from  records)  to  have  been  paid  to, 
or  for  any  first  mortgage,  or  paramount-lien  creditor.) 

And  any  officer  or  person  who  shall  vote,  declare,  make,  or  pay,  and  any  stock- 
holder of  any  of  said  companies  who  shall  receive  any  such  dividend  contrary  to 
the  provisions  of  this  act,  shall  be  liable  to  the  United  States  for  the  amount 
thereof,  which,  when  recovered,  shall  be  paid  into  said  sinking-fund.  (Note :  Under 
such  terms  and  provisions  a  suit  in  equity  brought  by  the  United  States  for  the 
recovery  of  the  value  of  the  interest  accrued  on  the  bonds  of  the  paramount  lien 
($116,000,000),  would  be  the  lawful  remedy  to  apply  in  this  case.)  (Note  2nd :  Under 
the  terms  of  Act  of  March  3rd,  1887,  the  position  of  the  Government  as  First  Mort- 
gage Creditor  being  attained  by  conforming  to  its  provisions,  there  could  be  no  doubt 


GOVERNMENT   DEBT   OF    THE   PACIFIC    RAILROADS.  425 

but  that  a  judgment,  equal  to  the  amount  stated,  could  be  recovered  against  said 
corporations  by  the  United  States ;  to  say  nothing  about  the  principal  of  the 
mortgage. ) 

Penalty.  And  every  such  officer,  person,  or  stockholder  who  shall  knowingly  vote, 
declare,  make  or  pay  any  such  dividend,  contrary  to  the  provisions  of  this  act,  shall 
be  deemed  guilty  of  a  misdemeanor,  and,  on  conviction  thereof,  shall  be  punished 
by  a  fine  not  exceeding  ten  thousand  dollars,  and  by  imprisonment  not  exceeding 
one  year. 

SEC.  7.  (See  the  connection  with  Sec.  3.)  That  there  shall  be  established,  etc. 
That  the  said  sinking-fund  so  established  and  accumulated  shall,  at  the  maturity  of 
said  bonds  so  respectively  issued  by  the  United  States,  be  applied  to  the  payment  and 
satisfaction  thereof,  according  to  the  interest  and  proportion  of  each  of  said  com- 
panies in  said  fund,  and  of  all  interest  paid  by  the  United  States  thereon,  and  not 
reimbursed,  subject  to  the  provisions  of  the  next  section. 

SEC.  8.  That  the  said  sinking-fund  so  established  and  accumulated  shall,  according 
to  the  interest  and  proportion  of  said  companies  respectively  therein,  be  held  for  the 
protection,  security,  and  benefit  of  the  lawful  and  just  holders  of  any  mortgage  or 
lien  debts  of  such  companies  respectively,  lawfully  paramount  to  the  rights  of  the 
United  States,  and  for  the  claims  of  other  creditors,  if  any,  lawfully  chargeable  upon 
the  funds  so  required  to  be  paid  into  said  sinking-fund,  according  to  their  respective 
lawful  priorities,  as  well  as  for  the  United  States,  according  to  the  principles  of 
equity,  to  the  end  that  all  persons  having  any  claim  upon  said  sinking-fund  maybe 
entitled  thereto  in  due  order.  (Note :  But  one  claim  has  been  filed  against  said  fund ; 
that  claim  is  set  forth  in  petition  No.  18,003.  But  one  party  (the  United  States)  was, 
at  such  time,  or  is  now,  known  to  have  held,  or  to  have  sought  to  hold,  an  interest  in 
the  said  sinking-fund,  other  than  the  parties  claimant  under  said  petition.  There- 
fore, said  fund  is  not  "lawfully  chargeable  upon  the  funds  by  said  section  8  of  act 
May  7th,  1878,  required  to  be  paid  into  said  sinking-fund,"  because,  see  further,  sec- 
tion 8  requires  payment  to  be  made  according  to  "lawful  priorities,"  and  "lawful 
priorities"  other  than  recorded  claimants  before  the  Treasury  Department,  and  said 
court,  do  not  exist.) 

SEC.  9.  That  all  sums  due  to  the  United  States  from  any  of  said  companies  respec- 
tively, whether  payable  presently  or  not,  and  all  sums  required  to  be  paid  to  the 
United  States  or  into  the  Treasury,  or  into  said  sinking-fund  under  said  act,  or  under 
the  acts  hereinbefore  referred  to  or  otherwise,  are  hereby  declared  to  be  a  lien  upon 
all  the  property,  estate,  rights  and  franchises  of  every  description  granted  or  con- 
veyed by  the  United  States  to  any  of  said  companies  respectively  or  jointly,  and  also 
upon  all  the  estate  and  property,  real,  personal  and  mixed  assets  and  income  of  said 
several  railroad  companies  respectively,  from  whatever  source  derived,  subject  to 
any  lawfully  prior  and  paramount  mortgage,  lien  or  claim  thereon.  (Note:  The 
only  question  of  the  title  of  the  United  States  becoming,  by  force  of  the  defaults 
made,  clear  and  perfected  is:  Is  there  a  "prior  and  paramount  mortgage,  lien  or 
claim  thereon?")  and  (Note  2nd:  The  only  question  of  the  title  to  claim  as  set  up  in 
Court  of  Claims,  No.  18,003,  is:  Is  there,  or  can  there  be,  any  title  paramount  to 
that  of  the  United  States,  and  to  that  set  up  in  said  claim,  set  up  in  said  Court, 
adversely  to  the  claimants  tneroin?)  (Note  3rd:  If  there  is,  and  if  such  claim  can 
be  so  set  up,  it  is  the  business  of  such  claimants  to  set  it  up,  and  not  mine,  or  that  of 
the  Government  to  entertain  outside  talk  about  it.) 

But  this  section  shall  not  be  construed  to  prevent  said  companies  respectively  from 
using  and  disposing  of  any  of  their  property  in  the  ordinary,  proper  and  lawful 
course  of  their  current  business,  in  good  faith  and  for  valuable  consideration. 

SEC.  10.  That  it  is  hereby  made  the  duty  of  the  Attorney-General  of  the  United 
States  to  enforce,  by  proper  proceedings  against  the  said  several  railroad  companies 
respectively  or  jointly,  or  against  either  of  them,  and  others,  all  the  rights  of  the  United 
States  under  this  act  and  under  the  acts  hereinbefore  mentioned,  and  under  any 
other  act  of  congress  or  right  of  the  United  States. 

And  in  any  suit  or  proceeding  already  commenced,  or  that  may  be  hereafter  com- 
menced, against  any  of  said  companies,  either  alone  or  with  other  parties,  in  respect 
of  matters  arising  under  this  act,  or  under  the  acts  or  rights  hereinbefore  mentioned  or 
referred  to,  it  shall  bo  the  duty  of  the  Court  to  determine  the  very  right  of  the  mat- 
ter without  regard  to  matters  of  form,  joinder  of  parties,  multifariousness,  or  other 
matters  not  affecting  the  substantial  rights  and  duties  arising  out  of  the  matters  and 
acts  hereinbefore  stated  and  referred  to. 

SEC.  11.  That  if  either  of  said  railroad  companies  shall  fail  to  perform  all  and 
singular  the  requirements  of  this  act  and  of  the  acts  hereinbefore  mentioned,  and  of 
any  other  act  relating  to  said  company,  to  be  by  it  performed,  for  the  period  of  six 
months  next  after  such  performance  may  be  due,  such  forfeiture  shall  operate  as  a 
forfeiture  of  all  the  rights,  privileges,  grants  and  franchises  derived  or  obtained  by 
it  from  the  United  States. 

And  it  shall  be  the  duty  of  the  Attorney-General  to  cause  such  forfeiture  to  be 
judicially  enforced 


426  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

SEC.  12.  That  nothing  in  this  act  shall  l>e  taken  to  be  or  construed  in  any  wise  to 
affect  or  impair  the  right  of  Congress  at  any  time  hereafter  further  to  alter,  amend, 
or  repeal  the  said  acts  hereinbefore  mentioned;  and  this  act  shall  be  subject  to 
alteration,  amendment,  or  repeal,  as,  in  the  opinion  of  Congress,  justice  or  the  pub- 
lic welfare  require. 

And  nothing  herein  contained  shall  be  held  to  deny,  exclude,  or  impair  any  right 
or  remedy  in  the  premises  now  existing  in  favor  of  the  United  States. 

SEC.  13.  That  each  and  every  of  the  provisions  in  this  act  contained  shall  severally 
and  respectively  be  deemed,  taken,  and  held  as  in  alteration  and  amendment  of  said 
act  of  eighteen  hundred  and  sixty-two  and  of  said  act  of  eighteen  hundred  and 
sixty-four  respectively,  and  of  both  said  acts.  [May  7,  1878.] 


[United  States  First  Comptroller's  Decisions,  Vol.  V,  pp.  206-207.] 

LOST  BOND  CASE. 

The  law,  in  theory  at  least,  attributes  to  the  Government  absolute  impeach- 
ability.  The  law  commands  what  is  legally  right.  "The  king  can  do  no  wrong" 
is  a  maxim  of  law.  The  Government  is  immortal,  and  in  doing  what  the  law 
authorizes  can  do  no  wrong.  Man  in  his  present  state  is  mortal  and  sometimes 
"prone  to  evil"  and  "born  unto  trouble  as  the  sparks  fly  upward."  If  the  finder  of 
a  lost  bond  present  it  to  the  Treasury  Departinant  the  possession  of  it  by  the 
officers  of  the  Department  raises  no  legal  presumption  of  payment.  The  law  pre- 
sumes, and  the  fact  is,  that  such  a  record  will  be  kept  of  it  as  will  protect  the  rights  of 
the  real  owner.  The  usage  as  to  the  bonds  now  in  question,  and  as  to  all  bonds  pre- 
sented for  payment,  or  for  the  issue  of  a  duplicate  as  to  which  there  is  a  question  of  con- 
troverted ownership,  is  to  stamp  them  thus:  "Treasury  Department,  Office  of  the  Sec- 
retary, April  22, 1884.  Held  for  decision  of  ownership,"  and  a  proper  record  is  made  to 
protect  the  rights  of  claimants.  In  legal  contemplation,  the  possession  of  such 
bond  by  the  Government  involves  no  danger  of  its  destruction  or  other  act  to  the 
prejudice  of  the  rightful  owner.  He  is  protected  by  the  stamp  and  record  to  which 
reference  has  been  made.  The  highest  guaranty  is  given  that  the  rights  of  the  real 
owner  will  be  protected.  The  Government  keeps  a  record  of  its  public  debt  open  to 
the  inspection  of  every  person  interested.  *  *  (206.) 

The  Government,  in  its  statement  of  the  public  debt,  periodically  published,  makes 
known  the  amount  of  mature  and  unpaid  public  securities.  It  is  the  duty  and  the 
interest  of  the  Government  to  ascertain  and  pay  the  owners  of  lost  bonds. 

f  The  Government  has  a  well-defined  duty  in  becoming  the  custodian  of 
lost  bonds;  the  purpose  of  its  custody  is  reasonable,  necessary,  and  just.  *  * 
The  Government  becomes  a  bailee  without  charge  to  the  owner.  *  *  *  (2 
Schouler,  Personal  Property,  15;  id.,  488;  2  Kent,  636;  Nicholson  v.  Chapman,  2  H., 
Bl.  254;  Wentworth  v.  Day,  3  Mete.,  352;  Marvin  v.  Treat,  37  Conn.,  96.)  The  pub- 
lic credit  will  be  improved  by  maintaining  the  right  and  duty  of  the  Government 
to  act  as  custodian,  and  thus  public  policy,  good  morals,  and  the  rights  of  owners 
of  bonds  be  promoted. 

A  learned  author  in  referring  to  "  goods  unclaimed  in  the  hands  of  some  trustee 
or  bailee,  deposits  in  a  bank  for  example,  where,  as  often  happens,  the  rightful 
owner  or  creditor  is  not  aware  of  his  rights,"  says:  "It  may  be,  in  such  a  case,  that 
the  owner  is  in  ignorance  of  his  rights,  and  would  still  assert  his  rights  should  any 
notice  reach  him;  or  it  may  bo  he  has  died." 

AFFIDAVIT  OF   ATTORNEY   OF   RECORD. 

Charles  Durkee,  who,  as  stated  by  the  Secretary  of  the  Treasury,  in  the  presence 
of  numerous  witnesses,  was  the  "lawful  and  sole  assignee  of  all  the  first-mortgage 
bonds  of  the  Union  Pacific,  Central  Pacific,  and  other  Pacific  railroad  companies, 
had  died  seized  in  legal  possession  thereof."  The  fact  was  unknown  to  his  "next 
of  kin"  and  lawful  heirs.  Such  next  of  kin,  as  were  represented  by  attorney  with 
powers  of  attorney  to  do  all  things  which  they,  or  either  of  them  might,  if  per- 
sonally present  at  the  doing  thereof,  had  made  L.  C.  Blaisdell  their  legal  representa- 
tive for  all  purposes  pertaining  to  the  collection  of  undiscovered  assets  of  said 
decedents'  estate. 

As  such  representative  he  was  called  by  order  of  the  Secretary  of  the  Treasury  to 
be  present  on  the  22d  day  of  April,  1884,  and,  obeying  such  order,  he  was  present 
and  witnessed  and  took  part  in  all  the  transactions  occurring  whereby  the  United 
States  has  become  the  legal  custodian  and  trustee  for  the  heirs  of  the  said  decedent, 
empowered  to  retain  custody  of  said  bonds  for  the  lawful  purposes  of  collection. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  427 

Iii  the  case  No.  18003  in  Court  of  Claims  said  Blaisdell  charges  the  United  States 
as  being  the  "lawful  custodian"  of  the  first-mortgage  bonds  of  the  paramount  lien 
to  that  of  the  United  States  of  the  Central  Pacific,  the  Union  Pacific,  and  other 
Pacific  railroad  companies,  as  designated  in  the  acts  of  Congress,  and  stated  by  the 
late  Secretary  of  the  Treasury,  in  the  presence  of  witnesses  named,  to  the  said  Blais- 
dell,  on  the  said  April  22,  1884. 

In  the  said  claim  against  the  United  States,  said  claimant,  for  himself,  asserts  that 
the  records  of  the  Treasury  Department  disclose  the  fact  that  himself,  and  no  other  per- 
son, has  ever  filed  a  claim  in  the  Treasury  Department  against  the  United  States,  as 
for  moneys  received  by  the  United  States,  pursuant  to  any  contract  or  agreement  not 
designated  in  the  Thurman  Act,  or  any  other  act  of  Congress;  that  the  sums  sever- 
ally, to  wit:  $64,623,512  in  gold  and  upward  of  $70,000,000  in  Pacific  Railroad  "call 
bonds"  have,  by  the  Secretary  of  the  Treasury,  been  "called  into  the  Treasury  (sub- 
treasury)  in  the  first  instance  (January  1,  1885),  and  in  the  second  instance,  made 
use  of  the  United  States  to  float  the  particular  amount  of  the  $70,000,000  and 
upwards"  of  call-bond  indebtedness  agreed  upon. 

That  at  the  maturity  of  the  last  of  such  call-bond  indebtedness  (or  August  16, 
1894),  the  entire  amount  of  investment  so  made,  with  interest  from  March  3,  1883, 
became  due  and  payable  by  the  United  States  to  the  "accredited  legal  representa- 
tives as  accredited  in  the  transactions  with  the  Treasury  Department  April  22, 1884." 

That  the  said  sum  in  gold,  with  interest  payable  in  gold,  at  6  per  centum  for  the 
time  held  by  the  United  States,  was,  at  the  time  of  the  maturity  of  said  call  bonds, 
also  due  to  said  creditors. 

Your  affiant  refers  the  honorable  court  to  the  files  of  the  Treasury  and  Interior  and 
State  Departments  and  to  the  Department  of  Justice  and  Court  of  Claims  for  detailed 
and  more  particular  information,  and  concludes  this  affidavit  by  the  statement  that 
a  few  days  prior  to  the  end  of  the  last  fiscal  year,  by  promises  representing  that  the 
Secretary  of  the  Treasury,  Mr.  Carlisle,  would  cause  to  be  closed  up,  in  due  form  of 
law,  and  presented  to  the  Court  of  Claims,  the  true  balances  of  sinking-fund  account, 
showing  the  amount  and  character  of  all  liability  of  the  United  States  for  or  arising 
from  the  several  acts  of  Congress  on  the  question  of  "bond  liabilities  of  the  United 
States  growing  out  of  aid  and  securities  advanced  or  assumed  by  the  United  States 
for  said  railroad  corporations." 

A  certain  motion  for  accounting  of  sinking  fund  was  withdrawn,  that  contrary  to 
the  promise  made,  and  by  which  said  promise  said  plaintiff  was  induced  to  withdraw 
his  motion  for  the  enforced  appearance  and  answer  of  said  Secretary  of  the  Treasury 
before  said  Court  of  Claims,  said  Carlisle,  Secretary  of  the  Treasury,  has  defaulted, 
and  has  given  neither  to  the  court  nor  to  said  affiant  any  satisfactory  excuse  therefor. 

For  which  cause,  and  other  substantial  matters  of  law  and  fact,  to  be  offered  in 
plea  hereafter,  your  petitioner,  L.  C.  Blaisdell,  in  appearance  for  those  whom  he 
represents  as  clients  in  the  matters  now  pending  before  the  Treasury  Department, 
prays  the  relief  to  be  granted  unto  him  by  the  honorable  court  that  an  order  of  the 
court  shall  issue  to  John  G.  Carlisle,  Secretary  of  the  Treasury  of  the  United  States, 
charging  him  with  accountability  for  all  the  funds  that  by  statute  the  United  States 
stands  chargeable  with  for  the  liquidation  of  the  entire  indebtedness  named  in  tho 
act  of  March  3,  1887,  as  "of  lien  prior  and  paramount  to  that  of  the  United  States," 
according  to  the  terms  and  tenor  of  said  act ;  for  which  relief,  and  other  proper  relief 
thereon,  your  petitioner  will  over  pray. 

BOND  OWNERSHIP:  CASE  OF  NO  OWNERSHIP  FOUND. 
PLEA  OF  L.  C.  BLAISDELL. 

Repeating  .from  page  206,  First  Comptroller's  Decisions,  Vol.  V,  the  words  of  First 
Comptroller  in  decision:  "The  law  commands  what  is  legally  right,"  and  applying 
this  decision  to  act  of  March  3,  1887,  wherein  said  law  directs  the  Secretary  of  the 
Treasury  to  pay  off  by  payments  out  of  the  Treasury  of  the  United  States,  the  par- 
ties entitled  to  payment  as  upon  a  "lien  prior  and  paramount  to  that  of  the  United 
States."  Such  direction  is  peremptory  command  of  this  Government  that  "the  Sec- 
retary of  the  Treasury  shall  do  what  is  commanded,"  and  we  can  not  avoid  the  con- 
clusion that  such  contemplated  payment  is  right,  for  all  the  means  of  ascertaining 
rights  have  been,  by  the  law,  placed  within  the  reach  of  successive  Secretaries  of  the 
Treasury  for  the  period  of  eleven,  almost  twelve,  years,  during  which  period  the 
claims  of  the  clientage  of  said  L.  C.  Blaisdell  have  ever  been  before  the  Department, 
'as  they  are  now,  supported  by  competent  testimony  of  their  legal  representative,  and 
undisputed  in  any  official  manner,  that  the  claims  are  supported  by  the  "good  faith 
and  credit  of  the  Government;"  by  all  the  acts  of  Congress  made  for  the  relief  and 
protection  of  creditors  of  such  class;  by  various  decisions  of  the  Supreme 
Court  in  relation  to  the  application  of  the  sinking  fund;  by  the  findings  of  fact 
of  the  Court  of  Claims  in  preliminary  procedure;  and  by  the  recommendation  of  the 


428  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

preceding  President  in  the  act  of  referring,  for  the  official  action  of  the  Secretary  of 
the  Treasury,  the  claims  of  the  claimants  as  filed  with  such  Chief  Executive,  and 
submitted  for  his  consideration,  according  to  the  provisions  of  said  act  of  March  3, 
1887. 

The  Comptroller,  Lawrence,  has  quoted,  and  has  sought  to  apply  (apparently)  to 
this  claimant  attorney,  the  phrase,  "The  king  can  do  no  wrong."  *This  man,  of  all 
others  the  most  directly  and  completely  responsible  for  all  wrongs  that  have,  since 
the  date  of  the  transactions,  been  inflicted  on  the  rightful  owners  of  the  bonds  in 
question,  would  have  this  Government  assume  that  his  own  act  in  disobedience  of 
law,  of  statute,  of  Treasury  rules  and  regulations,  and  in  disobedience  of  the  offi- 
cial order  of  the  late  Secretary  of  the  Treasury;  he  would  have  the  people  of  the 
United  States  believe  that  there  was  no  act  of  the  Secretary  of  the  Treasury  as 
I  have  stated ;  that  there  was  no  decision  of  the  late  Judge  Brewster  as  I  have  stated ; 
that  ho  did  not  himself  present  me  to  the  Secretary  of  the  Treasury,  saying  that  he 
had  examined  my  powers  of  attorney  and  found  them  to  be  sufficient  for  the  pur- 
pose of  constituting  me  the  proper  legal  representative  of  the  lawful  creditors  in 
the  matters  about  to  be  settled,  in  the  premises ;  that  he  did  not  know  what  rny 
representative  rights  were  ascertained  to  be  on  said  April  22,  1884.  In  brief,  this 
man  has,  by  all  the  personal  influence  he  has  been  able  to  exert,  sought  to 
defeat  the  rights  of  the  lawful  and  just  creditors  of  the  United  States  in  their 
cause.  The  example  of  this  man  has  been  most  pernicious.  Emboldened  by  his  ex- 
ample, succeeding  First  Comptrollers  have  said  that  they  had  no  official  knowledge 
of  any  record  of  the  transactions  in  the  Treasury  Department,  such  as  would  estab- 
lish proof  of  my  averments. 

The  singular  circumstance  about  it  all  is,  that  said  Lawrence  never  in  all  these 
years,  by  word  of  writing  or  orally,  to  me  addressed,  made  denial  of  any  part  of  my 
statements.  True,  it  has  come  to  my  knowledge  in  recent  years  that  he  thought  I 
was  mistaken  as  to  the  character  of  the  bonds  I  was  interested  in,  "that  they  were 
coupon  bonds,  the  number  and  classification  of  which  had  been  lost,  or  that  such  was 
his  impression."  But  he  did  not  state  this  as  a  fact,  but  as  his  opinion.  I  wish  to 
introduce  before  this  honorable  court  the  testimony  of  a  written  contract  signed  by 
Kennedy,  the  law  partner  of  Judge  Lawrence,  which  contract  had  for  its  purpose 
the  setting  up  of  the  very  claims  which  I  have  set  up  before  the  Treasury  Depart- 
ment and  Court  of  Claims,  and  to  ask  the  honorable  court  to  construe  its  meaning 
and  application  to  the  true  condition  and  status  of  my  rights,  and  to  take  notice 
that  such  contract  had  the  indorsement  of  Judge  LaAvrence  several  years  after  the 
said  April  22,  1884. 

I  ask  the  honorable  court  to  decide  whether  this  contract  does  not  disclose  an 
admission  on  the  part  of  Judge  Lawrence  that,  so  far  as  he  had  the  knowledge  or 
information  to  judge,  my  averments  were  substantially  true.  Remembering  that 
Judge  Lawrence  was  present;  that  he  was  First  Comptroller;  that  he  was  the  very 
officer  whose  orders  and  directions  brought  into  that  conference  all  other  officers'; 
that  he  had  been  in  correspondence  for  months  with  myself,  preparatory  to  bringing 
about  the  interview,  that  he  knew  the  purpose  of  the  same,  that  he  took  the  very 
first  and  initiatory  step  himself  in  the  procedure  then  had,  and  remembering  that 
both  by  statute  and  by  the  special  order  of  Judge  Folger,  and  advice  officially  given 
by  Judge  Brewster  he  was  charged  with  the  duty  of  preserving  and  transmitting  to 
me  a  certified  copy  of  the  proceedings  of  such  meeting.  Remembering  all  these 
points,  I  ask  the  honorable  court  to  construe  this  purported  contract  with  the  view 
of  determining  and  a  view  of  answering  the  question :  Did  this  First  Comptroller 
judicially  ascertain  and  officially  recognize  my  representative  rights  to  be,  as  I  have, 
in  petition  before  the  Court  of  Claims  and  in  application  to  the  Treasury  Depart- 
ment for  an  accounting,  represented  them  to  be  I 

The  second  part  of  my  plea  before  this  honorable  court  is  that  the  act  of  March  3, 
1887,  before  referred  to,  was  in  itself  a  recognition  of  rights,  the  nature  and  extent 
of  which  appears  in  the  act  itself,  and  the  legal  representative  of  which  rights 
received  due  official  indorsement  as  such  in  the  very  presentation  and  adoption  of 
the  act  by  Congress.  Senator  Cullom,  of  Illinois,  attached  that  portion  of  the  inter- 
state commerce  bill  which  relates  to  Pacific  railways  to  his  bill  before  offering  the 
same  to  be  voted  on,  with  the  fall  knowledge  that  such  provisions  as  were  contained 
therein  for  the  security,  benefit,  and  protection  of  holders  of  liens  prior  and  para- 
mount to  that  of  the  United  States  (in  such  matters  as  treated  thereof)  were  pro- 
vided at  the  earnest  solicitation  of  your  orator,  acting  in  the  same  office,  or  position, 
that  I  now  hold  in  the  record. 

I  am  credibly  informed,  and  believe  it  to  be  true,  that  the  passage  of  that  act  was 
regarded  by  the  friends  of  the  executive  and  official  heads  of  the  several  railroad 
corporations  concerned,  as  having  been  passed  with  the  full  knowledge  of  its  main 
supporters;  that  it  was  a  measure  looking  directly  to  the  protection  of  the  personal 
interest  in  paramount  liens,  represented  at  that  time  solely  and  exclusively  by  said 
Blaisdell,  attorney  of  record  for  creditors  of  the  paramount  lien. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  429 

The  question,  "  Who  are  the  legal  representatives  or  the  lawful  and  just  holders 
of  lien  prior  and  paramount  to  that  of  the  United  States  in  this  matter/7  has  never 
been  raised  in  any  due  and  legal  form  by  any  officer  of  any  department  representing 
the  Government.  It  only  assumed  the  form  of  a  question  because  the  attorney  of 
record  for  the  creditors  found  it  necessary  to  have  his  legal  rights  duly  recognized 
by  the  Court  of  Claims  by  due  investigation. 

Accordingly,  when  it  had  become  apparent  that  there  was  a  studied,  long  practiced, 
and  determined  evasion  of  my  rights  by  the  Treasury  Department,  and  that  many 
things  were  officially  circulated  tending  to  induce  the  general  public  to  the  belief 
that  my  claims  were  either  unfounded  in  law  and  fact,  or  rested  solely  upon  my  own 
assertions,  I  applied  to  the  Court  of  Claims  and  requested  that  court  to  send  for  the 
Committee  on  Claims,  and  to  grant  me  a  hearing  of  my  preliminary  statement  of 
claim.  This  was  duly  granted,  the  court  ordering  my  petition  to  be  filed,  and  tiled 
as  ex  parte,  on  the  showing  of  facts  made  by  me  under  oath  and  in  due  form  for 
record. 

From  time  to  time  I  continued  to  present  items  of  information  to  this  court,  until 
in  March  last  the  original  petition  was  succeeded  by  an  amended  petition,  and  the 
original  powers  of  attorney,  under  which  I  had  appeared  (with  Messrs.  Dudley  & 
Michiner),  were  supplemented  and  succeeded  by  new  powers  of  attorney  from  all, 
or  so  many  of  the  original  clients  and  heirs  at  law  of  Charles  Durkee  (the  assignee 
of  the  bonds),  as,  in  the  opinion  of  counsel  and  court,  were  required  to  be  made  more 
explicit.  Such  powers  of  attorney  were  made  irrevocably  to  myself,  exclusive  of  all 
other  attorneys  heretofore  associated  with  me.  I,  therefore,  upon  such  powers  of 
attorney  (on  rile  with  the  Court  of  Claims),  take  the  privilege  of  referring  this  hon- 
orable court  to  its  files  for  information  thereon. 

Representing  (as  I  believe  the  record  will  sustain  me  in  so  doing)  that  I  am  sole 
legal  representative  for  all  interested  parties  in  the  estate,  or  such  part  or  residue 
of  estate  of  the  late  Charles  Durkee  as  may  be  represented  by  bonds  of  the  Pacific 
railroads  or  bonds  of  the  United  States;  representing,  as  I  believe  I  hold  authority 
to  do,  those  important  interests  of  "lawful  and  just  holders"  of  the  indebtedness 
represented  by  the  bonds  in  question,  I  submit  to  this  honorable  court  the  act  of 
March  3,  1887;  the  act  of  May  7,  1878,  and  the  records  of  the  matter  contained  in 
the  Court  of  Claims,  under  the  title  of  L.  C.  Blaisdell  v.  The  United  States,  or,  more 
properly  speaking,  the  motion  that  the  court  will  order  the  Court  of  Claims  to  send 
up  to  itself  the  substantial  portions  of  the  records  of  the  matter  as  appear  on  its 
files,  or  the  whole  thereof,  as,  in  the  opinion  of  the  court,  maybe  deemed  best  suited 
to  the  purpose  of  informing  the  court  of  the  true  condition  of  the  Treasury  of  the 
United  States  in  relation  to  obligations  of  the  same,  expressed  in  United  States 
Statutes. 

And  the  court  having  been  duly  informed,  application  is  hereby  made  (under 
motion  for  the  purpose),  with  the  leave  of  this  court  first  granted,  for  a  final  hear- 
ing before  it,  on  the  question  of  the  "rights"  of  all  legal  and  equitable  creditors, 
other  than  the  United  States,  interested  in  the  distribution  of  the  funds  contained, 
or  to  be  derived  from  the  lawful  distribution  and  application  of  the  sinking  funds, 
such  as  are  provided  by  law  for  the  payment  of  any  mortgage  or  lien  debts,  lawfully 
paramount  to  that  of  the  United  States,  to  the  parties  to  be  designated  by  decision 
of  this  honorable  the  Supreme  Court  of  the  United  States. 

For  which  favors  and  relief  your  orator,  for  his  clients  and  himself  and  all  inter- 
ested parties,  will  ever  pray. 

L.  C.  BLAISDELL, 

Attorney  of  Record  in  Treasury  Department, 
in  Court  of  Claims,  and  Elsewhere,  for  "  Interested  Parties. 

[Certified  copy  of  case.    United  States  First  Comptroller's  Decisions,  Lawrence,  1884,  Vol.  V.] 

In  the  matter  of  the  application  of  a  private  person  for  a  certified  copy  of  certain 
records  and  files  of  the  Treasury  Department. 

DECISION. 

The  permission,  now  asked  to  withdraw  papers,  is  refused.  Copies  will  be  furnished 
when  the  regulation  on  the  subject  is  submitted. 

TREASURY  DEPARTMENT, 
First  Comptroller's  Office,  December  3, 1884. 

DECISION  BY   WILLIAM  LAWRENCE. 
[See  pp.  444  and  445,  Vol.  V.] 

Mr.  Lawrence  herein  says :  "An  application  is  made  by  a  private  person  to  the 
First  Comptroller  for  permission  to  withdraw  certain  papers  filed  in  this  office  relat- 


430  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

ing  to  a  claim  pending  therein;  or,  if  such  permission  can  not  bo  granted,  for  copies 
thereof." 

Applications  of  the  character  stated  are  frequent.  It  is  deemed  advisable  to  pre- 
sent in  this  connection,  for  general  information,  a  regulation  of  the  Treasury  Depart- 
ment on  this  subject  that  has  long  been  in  force,  and  which  a  blank  circular  letter 
of  the  Department  says  "must  be  strictly  observed  in  each  and  every  case."  The 
regulation  is  as  follows : 

"No  copy  of  any  paper  shall  be  furnished  to  private  individuals  except  on  appli- 
cation to,  and  with  the  previous  written  consent  of  the  Secretary,  one  of  the  assist- 
ant secretaries,  the  chief  clerk,  or  the  head  of  the  proper  bureau;  and  no  account, 
document,  or  paper  of  any  kind,  on  tile  in  the  Department,  shall,  on  any  occasion,  be 
withdrawn  by  agents,  attorneys,  or  other  persons.  Upon  application  for  copies  of 
papers  on  tile,  or  any  record  of  the  Department,  the  rule  established  in  the  Treasury 
order,  dated  October  20, 1830,  must  be  observed,  to  wit:  'Copies  of  accounts  or  other 
papers  on  tile  or  of  record  in  the  Department  are  to  be  furnished  only  to  such  persons 
as  may  be  interested  in  them  or  at  their  request ;  if  they  relate  to  suits  in  which  the  United 
States  are  interested,  such  copies  must  be  transmitted  to  the  United  States  attorney  having 
charge  of  such  sails,  subject  to  the  inspection  of  the  parties  applying  for  them;  and  when 
transmitted  to  the  district  attorneys  they  must  be  sent  through  the  Solicitor  of  the 
Treasury,  that  he  may  be  duly  apprised  of  all  the  facts  communicated  to  the  opposite 
party/  An  affidavit  showing  the  necessity  of  copies  must  be  furnished  in  all  cases." 

[Provisions  of  statutes  prescribing  mode  of  authenticating  copies  of  books,  records,  papers,  and  docu- 
ments in  the  Executive  Departments  and  elsewhere,  and  their  effect  as  evidence.] 

SEC.  461.  Land  titles :  Copies  in  cases  where  such  papers  would  in  any  wise  affect 
the  title  to  lands  shall  be  furnished  by  the  Secretary  of  the  Interior  for  the  person 
so  applying. 

SEC.  461.  Exemplification  of  patents,  etc. :  All  exemplification  of  patents  or 
papers  on  tile  or  of  record  in  the  General  Land  Office,  which  may  be  required  by  parties 
interested  in  the  same,  shall  be  furnished  by  the  Commissioner  upon  the  payment  by  such 
parties  at  the  rate  of  fifteen  cents  per  hundred  words,  ivith  additional  sum  of  one  dollar  for 
Commissioner's  certificate. 

SEC.  632.  Cases  of  appeal  in  equity  or  admiralty  causes:  In  cases  of  an  appeal,  as 
provided  by  the  preceding  section,  copies  of  the  proofs  and  of  such  entries  and  papers 
on  tile  as  may  be  necessary  on  hearing  of  the  appeal  may  be  certified  up  to  the  appellate 
court. 

SEC.  698.  Transcripts  on  appeals:  Upon  the  appeal  of  any  cause  in  equity,  etc., 
a  transcript  of  the  record,  as  directed  by  law  to  be  made,  and  copies  of  the  proofs 
and  of  such  entries  and  papers  on  tile  as  may  be  necessary  on  the  hearing  of  the  appeal, 
shall  be  transmitted  to  the  Supreme  Court.  Provided,  That  either  the  court  below  or  the 
Supreme  Court  may  order  any  original  document  or  other  evidence  to  be  sent  up,  in  addi- 
tion to  the  copy  of  the  record,  or  in  lieu  of  a  copy  of  a  part  thereof  .  And  on  such  appeals 
no  new  evidence  shall  be  received  by  the  Supreme  Court  except  in  admiralty  and 
prize  causes. 

SEC.  883.  Copies  of  any  records,  documents,  books,  or  papers  in  the  office  of  the 
Solicitor  of  the  Treasury,  certified  by  him  under  the  seal  of  his  office,  or  when  his 
office  is  vacant,  by  the  officer  acting  as  Solicitor  for  the  time,  shall  be  evidence  equally 
ivith  the  originals. 

(Read  also  sec.  884  and  sec.  885.) 

SEC.  886.  When  suit  is  brought  in  any  case  of  delinquency  of  a  revenue  officer,  or 
other  person  accountable  for  publicmoney,  a  transcript  from  the  books  and  proceedings 
of  the  Treasury  Department,  certified  by  the  Register  and  authenticated  under  the 
seal  of  the  Department,  shall  be  admitted  as  evidence,  and  the  court  trying  the  cause 
shall  be  authorized  to  grant  judgment  and  award  execution  accordingly.  And  all 
copies  of  bonds,  contracts,  or  other  papers  relating  to  or  connected  with  the  settle- 
ment of  an  account  between  the  United  States  and  an  individual,  when  certified  by 
the  register  or  (proper  auditor),  as  the  case  may  be,  to  be  true  copies  of  the  origiuals 
on  file,  and  authenticated  under  the  seal  of  the  Department,  may  be  annexed  to  such 
transcripts,  and  shall  have  equal  validity,  and  be  entitled  to  the  same  degree  of 
credit  which  would  be  due  to  the  original  papers  if  produced  and  authenticated  in 
court:  Provided,  That  where  suit  is  brought  upon  a  bond,  or  other  sealed  instrument, 
and  the  defendant  pleads  uon  est  facturn,  or  makes  his  motion  to  the  court,  verify- 
ing such  plea  or  motion  by  his  oath,  the  court  may  take  the  same  into  consideration, 
and,  if  it  appears  to  be  necessary  for  the  attainment  of  justice,  may  require 
the  production  of  the  original  bond,  contract,  or  other  paper  specified  in  such 
affidavit. 

SEC.  887.  Transcripts  as  evidence  in  trial  of  indictments:  Upon  the  trial  of  any 
indictment  against  any  person  for  embezzling  public  monies  it  shall  be  sufficient 
evidence,  for  the  purpose  of  showing  a  balance  against  such  person,  to  produce  a 


GOVERNMENT   DEBT   OF   THE    PACIFIC    RAILROADS.  431 

transcript  from  the  books  and  proceedings  of  the  Treasury  Department,  as  provided 
by  the  preceding  section. 

[Note :  It  is  claimed  in  said  suit  that  a  true  transcript  from  the  proceedings  of  the 
Treasury  Department  will  show  that  in  each  and  every  affidavit,  oath,  or  certificate 
made  by  any  officer  relative  to  "accounts  between  the  United  States  and  the 
Pacific  Railroad  companies"  as  relates  to  their  " creditors  of  the  statutory  para- 
mount liens"  and  certifying  credits  in  favor  of  said  companies  as  having  dis- 
charged portions  of  their  subsidy  debt,  or  indebtedness  to  the  United  States,  by 
or  through  the  deposits  by  said  companies  made  into  the  sinking  fund  designated 
by  act  of  May  7,  1878,  was  and  remains  a  certificate,  affidavit,  and  oath  erroneously 
made,  and  made  in  fraud  of  the  "lawful  and  just  holders  of  liens  prior  and  para- 
mount to  that  of  the  United  States,"  and  the  court  is  requested  to  take  notice  further 
that  section  8  of  said  named  act  of  May  7, 1878,  is  a  statutory  prohibition  of  any  such 
entry  of  credits,  in  any  such  manner,  or  out  of  said  sinking  fund,  whilst  the  said 
companies,  or  either  of  them,  shall  remain  (as  they  do)  in  default  as  for  the  pay- 
ment of  "interest  accrued"  on  such  paramount  lien  bonds  or  any  portion  thereof.] 

The  inference  is  that  the  officers  of  the  Government  who  have  made  entries  of 
credits  to  the  Pacific  railroad  companies  through  certificates  to  them  issued  as  for 
payments  made  in  reduction  of  the  debt  due  by  them  to  the  United  States,  thus 
denying  to  "lawful  creditors"  their  own  statutory  credits,  are  constructively  guilty 
of  acts  of  embezzlement;  for  misappropriation  of  funds,  or  making  use  of  them  in 
any  manner  not  directed  by  law,  is  embezzlement,  as  described  in  the  statute. 

.This  part  of  the  subject  I  leave  with  the  court,  just  where  the  statute  and  the 
record  leave  it,  and  proceed. 

[Note:  On  sec.  886.  Suit  No.  18003  in  Court  of  Claims  is  a  "suit  brought  on  a 
bond  and  other  sealed  instruments;"  and  the  defendant,  the  United  States,  has 
not  pleaded  non  est  factuui,  and  the  attorneys  charged  with  the  defense  of  the 
United  States  in  said  suit  have  not  made  their  motion  to  the  court,  or  in  any 
manner  verified,  under  oath,  any  plea  or  motion  relating  to  the  subject-matter 
of  this  suit;  therefore  it  can  not  be  necessary,  or  be  considered  to  be  necessary 
for  the  attainment  of  justice  by  the  Court  of  Claims,  to  require  either  the  produc- 
tion of  the  original  bonds  as  assigned  to  Charles  Durkee,  deceased,  by  the  Pacific 
railroad  companies  named,  or  the  original  contract  with  the  United  States  made  by 
the  claimant,  or  other  paper  not  specified  by  affidavit  of  the  defendant  attorneys,  to 
be  necessary  to  complete  my  proofs.] 

For  proof  of  evidence  of  "Demand  in  suits  for  recovery  of  balances  due,"  see  sec- 
tion 890,  Post-Office  Department. 

SEC.  899.  When  original  records  are  lost  or  destroyed:  When  the  record  of  any 
judgment,  decree,  or  other  proceeding  of  any  court  of  the  United  States  is  lost  or 
destroyed,  any  party  or  person  interested  therein  may,  on  application  to  such  court,  and 
on  showing  to  its  satisfaction  that  the  same  was  lost  or  destroyed  tvithout  his  fault,  obtain 
from  it  an  order  authorizing  such  defect  to  be  supplied  by  a  duly  certified  copy  of  the  origi- 
nal record,  where  the  same  can  be  obtained;  and  such  certified  copy  shall  thereafter  have, 
in  all  respects,  the  same  effect  as  the  original  record  would  have  had. 

[Note :  It  is  assumed,  but  not  pleaded,  answered,  or  put  in  form,  of  demurrer  by  the 
defense,  that  the  original  record  of  proceedings  had  at  the  meeting  in  First  Comp- 
troller's Office  in  1884  have  been  lost  or  destroyed;  that  the  bonds  named  in  petition 
can  not  be  discovered  in  the  Treasury  Department;  that  the  name  of  the  assignee 
thereof  (if  there  was  an  assignee)  can  not  be  discovered  in  any  record  of  the  Treas- 
ury or  other  Department;  and  yet  the  testimony  filed  with  the  Court  of  Claims  for 
the  claimants  disclose  the  statement  in  writing,  signed  by  one  Thomas  Robinson,  as 
custodian  of  files  and  records  pertaining  to  this  said  assignee,  Charles  Durkee, 
deceased,  that  all  tbe  records,  vouchers,  letters,  and  other  matter  pertaining  to  ac- 
counts between  said  Charles  Durkee  and  the  United  States  are  to  be  found  in  vaults 
Nos.  75  and  85,  in  the  Treasury  Department;  this  statement  bearing  the  date  of  Jan- 
uary 19,  1885.] 

This  statement  is  in  direct  response  to  the  question  of  his  superior  officer,  Jonathan 
Tarbell,  which  question  is  also  found  011  the  same  slip  of  paper  now  on  file  in  the  Court 
of  Claims;  and  the  same  paper  refers  to  the  legal  representative  for  whom  said  Tar- 
bell  bespeaks  the  assistance  of  said  Robinson  in  discovering  the  very  bonds  which 
it  is  said  can  not  be  discovered  in  the  Treasury  Department. 

SEC.  900.  When  any  such  record  is  lost  or  destroyed,  and  the  defect  can  not  be 
supplied  as  provided  in  the  preceding  section,  any  party  or  person  interested  therein 
may  make  an  application  to  the  court  to  which  the  record  belonged,  verified  by  affi- 
davit, showing  such  loss  or  destruction ;  that  the  same  occurred  without  his  fault  or 
neglect;  that  certified  copies  of  such  record  cannot  be  obtained  by  him;  and  show- 
ing also  the  substance  of  the  record  so  lost  or  destroyed,  and  that  the  loss  or  destruc- 
tion thereof,  unless  supplied,  will  or  may  result  in  damage  to  him.  The  court  shall 
cause  said  application  to  be  entered  of  record,  and  a  copy  of  it  shall  be  served  per- 
sonally upon  every  person  interested  therein,  together  with  a  written  notice  that  on  a  day 


432  GOVERNMENT   DEBT    OP    THE    PACIFIC    RAILROADS. 

staled  therein,  which  shall  not  be  less  than  sixty  days  after  such  service,  said  application 
will  l)e  heard;  and  if,  upon  such  hearing,  the  court  is  satisfied  that  the  statements 
contained  in  the  application  are  true,  it  shall  make  and  cause  to  bo  entered  of  record 
an  order  reciting  the  substance  and  effect  of  said  loss  or  destroyed  record.  Said  order 
shall  have  the  same  eifect,  so  far  as  concerns  the  party  or  persons  served,  as  above 
provided,  but  subject  to  intervening  rights,  which  the  original  record  would  have 
had  if  the  same  had  not  been  lost  or  destroyed. 

SEC.  908.  The  edition  of  the  laws  aud  treaties  of  the  United  States,  published  by 
Little  &  Brown,  shall  be  competent  evidence  of  the  several  public  and  private  acts 
of  Congress,  and  of  the  several  treaties  therein  contained,  in  all  the  courts  of  law 
and  equity  and  of  maritime  jurisdiction,  and  in  all  the  tribunals  and  public  offices 
of  the  United  States,  without  any  further  proof  or  authentication  thereof. 

[Note:  The  Comptroller,  Lawrence,  has  evidently  confounded  a  real,  personal,  and 
to  himself  well-known  "applicant  for  a  well-known  purpose,"  based  upon  rights  well 
known  to  himself,  with  an  informal  and  general  instruction  to  the  general  public,  and 
the  general  civil  service  or  Executive  officers  of  the  Government,  in  this  so  styled 
''Certified  copy  case."  The  evidence  of  a  personal  witness,  however,  will  show  to 
the  court  that  Judge  Lawrence  presented  the  volume  from  which  these  extracts  are 
taken  to  the  affiant  and  attorney  for  claimants  in  the  cast}  pending  (as  alleged) 
before  the  Treasury  Department,  with  the  statement  "that  he  had  written  up  said 
affiant's  case  in  his  (Lawrence's)  Firat  Comptroller's  Decisions;"  and  by  his  remarks 
thereon  gave  his  hearers  to  understand  that  he  meant  to  designate  said  L.  C.  Blais- 
dell  as  the  "private  person"  who  had  "applied  for  (not  certain  files  and  records, 
etc.,  in  these  words),  but  who  had,  in  the  interim  between  the  22d  day  of  April  and 
the  3d  day  of  December,  1884,  applied  to  Lawrence,  as  First  Comptroller,  for  the 
delivery  of  papers,  files,  and  documents  named  in  his  affidavit  as  the  bonds  of  the 
Union  Pacific,  the  Central  Pacific,  and  other  railroad  companies,  and  for  the  complete 
orders  of  the  head  (Hon.  Secretary  Folger)  of  the  Treasury  Department  concerning 
said  bonds;  and  for  the  certificate  of  ownership  of  such  bonds,  to  be  certiiied  to 
applicant,  as  the  attorney  in  fact  for  the  legal  representatives  and  creditors  under 
said  mortgage  bonds."] 

[Summary  and  application  of  the  foregoing  decision  of  First  Comptroller ;  rules  and  regulations  of 
Treasury  Department,  etc.,  to  the  subject-matter  to  bo  construed  by  the  Supreme  Court.] 

The  foregoing  recites  in  order  as  follows:  That  some  time  during  the  year  1884 
"an  application  was  made  by  a  private  person  to  the  First  Comptroller  of  the  Treas- 
ury for  permission  to  withdraw  certain  papers  filed  in  said  office  relating  to  a  claim 
pending  therein;  or,  if  such  permission  can  not  be  granted,  for  copies  thereof." 

On  the  call  of  the  Court  of  Claims  for  evidence  from  the  Treasury  Department 
(issued  15th  of  March,  1895),  such  Department  fails  to  furnish  to  the  court  the  infor- 
mation that  should  enable  it  to  determine  who  such  "private  person"  was  who  made 
the  application  stated  in  this  book  as  the  subject  of  the  First  Comptroller's  decision, 
December  3,  1884. 

The  affidavit  of  said  "private  person"  is  now  on  file  in  the  Court  of  Claims,  and 
it  states  that  such  person  was  L.  C.  Blaisdell. 

In  like  manner  the  so-termed  answer  or  response  of  the  said  Department,  to  the 
call  for  the  information  made  by  the  court,  fails  to  furnish  "any  such  statement  in 
writing,  as  section  188  of  the  Revised  Statutes  requires  shall  be  made,"  in  all  such 
cases,  to  wit:  It  fails  to  give  or  to  set  forth  any  fact  in  corrpboration  or  in  denial  of 
the  following  facts  stated  in  the  petition  in  Case  No.  18003 :  First.  Whether  said  Blais- 
dell was  the  identical  person  who  made  the  application  referred  to  in  said  First 
Comptroller's  decision  of  December3, 1884.  Second.  Whether  the  "certain  papers  and 
files  of  the  Treasury  Department,"  as  stated  in  the  petition,  were  or  were  not  such 
files  and  papers  as  the  said  Blaisdell  has  named  in  his  affidavit.  Third.  Whether  said 
Blaisdell  was,  at  such  time,  attorney  for  claimants  with  a  "claim  pending  in  the 
Treasury  Department."  Fourth.  Whether  the  permission  to  withdraw  papers  related 
to  the  papers  known  as  the  "  Original  first-mortgage  bonds  of  the  Union,  Central, 
and  other  Pacific  railroads."  Fifth.  Whether  the  permission  refused  and  the  privi- 
lege granted  in  the  said  order,  or  decision  of  said  First  Comptroller,  designated  and 
was  intended  to  apply  to  said  Blaisdell,  or  some  other  person. 

All  of  which  questions,  unanswered  by  said  Department,  under  the  said  call  of  the 
court,  said  Blaisdell,  standing  on  his  rights,  as  representing  all  known  and  recog- 
nized creditors  of  the  United  States,  in  respect  of  the  matters  and  things  concerned 
in  the  said  undiscovered  and  unrevealed  records  of  the  Treasury  Department,  now 
presents,  as  an  original  question,  to  the  honorable  Supreme  Court,  with  the  prayer 
that  it  will  determine :  1.  The  personality  of  the  party  to  whom  said  Comptroller's 
decision  was  intended  to  apply.  2.  The  class  and  particular  "papers  and  files  or 
records  of  the  Treasury  Department"  such  purported  decision  is  held  to  apply  to; 
and,  finally,  should  they  be  found  to  be,  and  to  include  the  first-mortgage  bonds  of 
the  said  Union  and  Central  Pacific  railroad  companies  and  other  matter,  as  set  forth 


GOVERNMENT   DEBT    OF    THE    PACIFIC    KAILROADS.  433 

in  claimants'  petition,  now  on  file  in  the  Court  of  Claims,  the  prayer  of  the  applicant 
is  for  the  Court  of  Claims  to  be  instructed  by  the  Supreme  Court  in  accordance  with 
its  findings  of  fact  thereon,  to  the  end  that  it  may  discover  the  "lawful  and  just 
holders  of  the  lien  or  liens  prior  and  paramount  to  that  held  by  the  United  States  in 
respect  of  the  debts  of  the  aforesaid  corporations." 

.  For  which  favors  and  such  further  relief  as  your  honorable  court  may  graciously 
grant,  your  orator  and  petitioner  shall  ever  pray. 

L.  C.  BLAISDELL, 
For  claimants  in  said  Case  No.  18003  in  Court  of  Claims, 

and  for  the  use  and  benefit  of  suck  other  parties  as  may  be 

found  entitled  to  some  part  of  said  funds,  as  claimed. 


Affidavit  of  L.  C,  Blaisdell,  to  be  appended  to  potvers  of  attorney,  filed  in  Case  No,  18003, 

Court  of  Claims. 

AFFIDAVIT. 

Personally  appeared  before  me,  John  T.  Plummer,  a  notary  public  in  and  for  the 
county  of  Marion,  State  of  Indiana,  Leonard  C.  Blaisdell,  attorney  of  record  in  Case 
No.  18003,  Court  of  Claims,  who,  being  on  his  oath  first  duly  sworn,  states  as  follows: 

In  reply  to  the  statements  in  official  report  contained,  of  the  Acting  Secretary  of 
the  Treasury  and  of  the  First  Comptroller  of  the  Treasury,  as  appears  from  the 
inclosed  and  accompanying  papers  of  the  date  of  May  14,  1895,  wherein  said  report 
mentions  letters,  to  wit,  dated  August  23,  1884;  dated  September  30,  1884;  dated 
March  31, 1884,  etc.  I  will  not  undertake  to  say  exactly  what  those  letters  contained, 
not  having  preserved  any  copy  of  the  same,  nor  any  copies  of  the  letters  written  by 
me  during  said  year  of  1884. 

I  am  sure,  however,  that  on  the  22d  day  of  April,  A.  D.  1884, 1  presented  to  the  then 
chief  clerk  of  the  Treasury  Department  a  number  of  letters,  and  that  most,  if  not  all 
of  such  letters,  were  retained  by  said  clerk  ostensibly  for  the  purpose  of  using  them 
as  vouchers  for  calling  together  the  heads  of  the  several  Departments  and  the  account- 
ing officers  whom  I  have  named  in  my  petition. 

I  am  sure  that  the  letter  on  tile  with  this  honorable  court,  containing  a  reference 
to  the  Treasury  rule,  said  to  have  been  adopted  in  October,  1830,  and  adhered  to  in 
the  Treasury  Department  as  a  rule  ever  afterwards,  had  no  application  (properly)  to 
me,  or  to  the  matters  pending  between  myself  and  the  Treasury  Department  at  that 
time. 

Yet  there  was  an  attempt  to  make  it  apply  to  me,  as  may  be  seen  by  the  fact 
that  I  am  the  person  addressed. 

In  conformity  with  the  requirements  that  I  should  then  make  an  affidavit  for  the 
use  of  the  Treasury  Department  I  made  it,  and  it  should  appear  appended  to  some 
one  of  the  letters  written  by  me  within  the  year,  and  before  the  decision  of  the  First 
Comptroller  of  the  3d  day  of  December  of  that  year. 

In  conformity  with  the  well-known  usage,  and  the  provision  of  the  United  States 
Revised  Statutes  for  the  reproduction  of  "  lost  bonds,  and  of  papers  and  files  "  relat- 
ing thereto,  I  make  this  my  statement  in  affidavit  concerning  the  same,  to  wit: 

It  was  in  conformity  to  official  advices  contained  in  one  or  more 'of  the  said  letters 
retained  by  the  Treasury  Department  (as  aforesaid),  that  I  appeared  before  the  head 
of  that  Department,  in  the  First  Comptroller's  office,  on  said  date  of  April  22,  1884. 
(Hon.  J.  G.  Cannon,  who  introduced  me  to  the  chief  clerk,  is  a  witness  who  can 
testify  the  purpose  of  such  introduction.) 

It  was  in  conformity  to  the  specific  information  referred  to  in  these  "lost  letters" 
(to  me  addressed)  that  I  acted  in  coming  before  the  Department  at  such  time. 

It  was  in  conformity  to  "'information"  contained  in  said  "lost  letters"  that  I  at 
the  time  contended  with  the  First  Comptroller  of  the  Treasury,  William  Lawrence, 
that  he  had  no  lawful  authority  to  withhold  from  me  the  "certificate  of  owner- 
ship" of  the  "First-mortgage  bonds "  of  the  Central  and  the  Union  Pacific  railroad 
companies. 

It  is  in  conformity  with  such  information,  as  follows :  That  Charles  Durkee  died 
seized  and  possessed  of  the  bonds  of  these  and  other  railroad  companies  to  the  amount 
of  $64,623,512.  That  after  his  decease  bonds  termed  interest  call  bonds  "accumu- 
lated in  the  Treasury  Department  for  the  period  of  twenty  years  and  upward." 
assigned  to  Charles  Durkee,  or  legal  representative.  It  is  in  conformity  with  such 
information  (given  to  me  by  the  late  Secretary  Folger  April  22,  1884)  that  I  have 
stated  "that  6 per  cent  per  annum  interest  had  accrued,  without  the  payment  of 
any  part  thereof,  on  such  bonds,  up  to  the  date  of  said  April  22,  A.  D.  1884. 

It  is  in  conformity  with  the  knowledge  obtained  through  these  official  letters 
retained  by  the  Treasury  Department,  aud  others  filed  with  this  honorable  court 


434  GOVERNMENT    DEBT    OF    THE    PACTFIC    RAILROADS. 

which  have  already  been  certified  for  iny  use,  that  the  Treasurer  of  the  United 
States,  Conrad  N.  Jordan,  acknowledged  officially  to  me  the  obligation  of  the  <Jov- 
erumeut  to  settle  in  the  Treasury  Department  all  the  liabilities  attaching  to  the 
United  States  by  reason  of  the  transactions  aforesaid,  and  in  which  matter  said 
Jordan  acknowledged  that  the  said  sum  of  $04,623,512  was  due  and  payable  by  the 
United  States  to  me,  as  legal  representative  of  lawful  and  j  ust  creditors  of  the  United 
States.  I  furthermore  add  that  Mr.  Jordan  himself  suggested  to  me  the  propriety  of 
procuring  "  an  enabling  act,"  as  he  termed  it,  through  which  he  said  it  would  be  his 
duty,  when  the  same  should  have  been  enacted,  to  pay  off  the  obligations  thereunto 
attaching  to  the  United  States  by  reason  of  those  matters  and  things  which  have 
been  alleged  in  my  complaint;  and  for  reference  I  give  the  Hon.  Shelby  M.  Cullom, 
United  States  Senator  from  the  State  of  Illinois,  and  state  as  follows :  Mr.  Cullom  and 
myself  at  different  times,  and  in  the  Seuate  Chamber  of  the  United  States  at  various 
times  discussed  in  private  the  modes  of  reaching  an  accounting  from  the  Govern- 
ment in  those  matters  and  things  which  did  not  appear  of  record  in  the  railroad 
reports.  I  told  him  at  various  times  what  the  trouble  was ;  that  accounts  which 
had  been  duly  rendered  to  me  while  acting  in  my  lawful  capacity  as  legal  represen- 
tative of  the  holders  of  these  first-mortgage  bonds  were  withheld  from  me,  and  were 
not  lawfully  reported  to  Congress  as  they  should  bo. 

I  told  him  that  there  ought  to  be  some  action  of  Congress  taken  to  protect  such 
interests  as  those  I  represented. 

He  told  me  that  he  would  do  what  he  could  to  get  the  proper  action  taken ;  that  I 
should  write  up  and  send  to  him  what  I  considered  would  be  the  proper  action  for 
Congress  to  take. 

I  did  so,  and  he  procured  the  enactment  of  the  act  of  March  3, 1887,  appending  the 
same,  as  I  understood,  to  other  enactments  relating  to  the  interstate-commerce  bill. 

Senator  Allison,  of  Iowa,  also  conferred  with  me  about  the  matter,  and  was  cogni- 
zant of  the  relation  that  I  sustained  toward  the  subject-matter  of  this  act. 

But  the  one  person  whom  I  have  regarded  as  being  most  at  fault  has  been  William 
Lawrence,  of  Bellefoutaine,  Ohio.  This  man  I  knew  to  have  been  directed  by  the 
late  Hon.  Charles  J.  Folger,  "to  keep  and  preserve  all  necessary  files  and  records  of 
the  Treasury  Department,"  and  all  other  files  of  all  other  Departments  involved  in 
the  transactions  of  the  said  April  22  in  the  First  Comptroller's  Office;  and  further- 
more charged  him  "with  the  delivery"  to  myself  of  "  certified  copies"  of  the  same; 
and  it  is  true  that  I  have  often  reminded  this  same  Judge  Lawrence  of  his  obligations 
in  this  respect,  and  that  he  was  reminded  of  the  same  by  myself  and  the  Hon.  J.  G. 
Cannon  on  the  occasion  of  my  returning  in  five  or  six  weeks  after  the  date  of  said 
April  22;  and  it  is  true  that  he  did  not  dispute  the  fact,  but  sought  to  create  the 
impression  on  those  around  him  that  he  did  not  know  much  about  the  matter  I  was 
talking  about;  and  it  is  true  that  Mr.  Cannon  expressed  some  surprise  at  his  assumed 
ignorance  of  these  matters,  and  used  the  words,  "Why,  Judge  Lawrence,  were  you 
not  there?  Don't  you  know  all  about  it?"  And  then  he  said  he  did,  but  that  it  was 
not  proper  to  speak  openly  of  what  occurred  there,  but  that  he  would  see  to  it  that 
all  proper  information  was  given  me.  It  is  true  also  that  at  the  same  time  he  (Judge 
Lawrence)  called  Joseph  A.  D.  Thompson,  Deputy  First  Comptroller,  and  directed 
him  to  go  with  me  to  see  William  Armstrong,  the  then  Commissioner  of  Railroads, 
and  to  inform  that  gentleman  that  he  must  make  reports  to  me.  It  is  true  that  Mr. 
Armstrong  acknowledged  my  right  to  receive  these  reports,  and  presented  me  with 
the  very  one  he  was  then  using  in  his  office.  It  is  true  that  all  succeeding  Commis- 
sioners of  Railroads  have  recognized  their  accountability  tome  as  the  legal  represen- 
tative of  the  first-mortgage  interest  in  these  respective  railroad  properties. 

It  is  true  that  said  William  Lawrence  offered  to  make  a  contract — and  did,  in  terms, 
make  a  contract — to  become  my  attorney  to  prosecute  my  rights,  and  only  failed  to 
become  so  because  the  man  who  was  interested  with  me  in  the  matter,  as  a  financial 
supporter,  refused  to  sign  the  contract  without  Judge  Lawrence  should  tell  him,  in 
affidavit,  what  did  actually  take  place  in  that  "meeting  of  April  22,  1884." 

It  is  true  that  he  said  in  a  letter  to  Simon  P.  Douthart,  of  Dearborn  street,  Chi- 
cago, that  he  "did  know  all  about  what  then  occurred,  but  that  he  never  would 
reveal  it  until  I  should  employ  him,  and  pay  him,  as  for  services  of  an  attorney. 

It  is  true  that  he  made  a  similar  statement  in  a  letter  to  C.  W.  G.  Merriam,  of 
Chicago  (attorney). 

To  conclude  my  affidavit,  I  believe  that  said  William  Lawrence  knew  for  many 
years  afterwards,  and  now  knows,  unless  age  has  dimmed  his  memory,  all  the  facts 
in  relation  to  the  foundation  of  the  present  suit  of  L.  C.  Blaisdell  v.  The  United 
States,  and  that  his  deposition  should  be  taken. 

It  is  true,  likewise,  of  U.  T.  Wymond,  ex- United  States  Treasurer;  of  Eugene  B. 
Daskam,  chief  clerk;  of  William  Fletcher,  an  accounting  officer,  and  of  Charles  V. 
Parkman,  or  the  stenographer,  who,  as  Judge  Lawrence  has  told  me,  took  down 
every  word  that  was  spoken  by  myself  and  all  present  in  the  said  meeting  of  April 
22,  A.  D.  1884.  This  affidavit  is  submitted,  that  the  honorable  court  may  use  its 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  435 

pleasure  concerning  the  obtaining  of  affidavits  or  of  depositions  from  the  parties 
whose  names  are  herein  mentioned. 

CRIME   AGAINST  THE   GOVERNMENT. 

See  sections  5403  and  5408,  United  States  Revised  Statutes. 

''SEC.  5403.  Every  person  who  willfully  takes  away  any  record,  paper,  pro- 
ceeding, or  document,  filed  or  deposited  with  any  clerk  or  officer  in  any  public  office, 
or  with  any  judicial  or  public  officer,  shall,  without  reference  to  the  value  of  the 
record,  paper,  document,  or  proceeding  so  taken,  pay  a  fine  of  not  more  than  two 
thousand  dollars,  or  suffer  imprisonment  at  hard  labor  not  more  than  three  years,  or 
both. 

"SEC.  5408.  Every  officer,  having  the  custody  of  any  record,  paper,  document,  or 
proceeding  specified  in  section  5403,  who  fraudulently  takes  away,  or  withdraws,  or 
destroys,  any  such  record,  paper,  or  proceeding  filed  in  his  office,  or  deposited  with 
him,  or  in  his  custody,  shall  pay  a  fine  of  not  more  than  two  thousand  dollars,  or 
suffer  imprisonment  at  hard  labor  not  more  than  three  years,  or  both;  and  shall, 
moreover,  forfeit  his  office  and  be  forever  afterward  disqualified  from  holding  any 
office  under  the  United  States." 

(The  above  relates  to  "destroying  or  removal,  from  place  of  lawful  deposit,  the 
files  and  records  of  the  Treasury  Department.") 

I  charge  it  to  be  the  fact  that  William  Lawrence,  who  was  First.  Comptroller  of 
the  Treasury,  under  a  commission  dated  July  15,  1880,  to  the  date  of  March  24,  1885, 
did,  under  the  special  direction  and  by  official  consent  of  the  late  Secretary  of  the 
Treasury,  the  Hon.  Charles  J.  Folger,  in  the  presence  of  witnesses  (of  whom  I  am 
one),  on  the  date  of  April  22,  1884.  in  the  office  of  said  First  Comptroller  of  the 
Treasury,  assume  the  custody,  care,  control,  and  safe-keeping  of  all  such  "files  and 
records:"  First,  of  the  Treasury  Department;  second,  of  the  Department  of  the 
Interior;  third,  of  the  Department  of  State;  fourth,  of  the  Department  of  Justice; 
as  did,  in  law  and  fact,  designate,  describe,  determine,  and  constitute  the  true,  lawful, 
and  just  holders  of  mortgage  or  lien  debts  of  the  Central  Pacific,  the  Union  Pacific 
et  al.  railroad  companies,  by  reason  of  which  said  liens  on  their  property  rights 
and  franchises  the  United  States,  under  acts  of  Congress,  have  become  obli- 
gated to  "clear  off,  by  payments,  out  of  the  Treasury  of  the  United  States,"  all  such 
class  and  character  of  indebtedness;  and  I  charge  the  fact  to  be  furthermore  true 
that  each  and  every  successor  in  office  of  the  said  William  Lawrence  have,  in  official 
letters,  repeatedly  declared  their  inability  to  furnish,  either  to  my  self  or  to  any  inter- 
ested parties  whomsoever,  any  of  the  "  files  and  records  "  of  the  said  office,  so  as  afore- 
said, left  by  the  Secretary  of  the  Treasury  aforesaid,  in  the  care,  keeping,  and  custody 
of  the  First  Comptroller,  or  the  "certified  copies  thereof,"  and  that  valuable  papers, 
records,  documents,  and  proceedings,  all  pertaining  to  the  settlement  of  the  indebted- 
ness of  said  Pacific  railroad  companies,  and  in  which  affiant  held  an  interest  by  right 
of  representation  as  attorney  of  record  in  said  settlements,  have  become  "lost  or 
destroyed  through  the  violation  by  said  William  Lawrence"  and  others  of  the  rules 
and  regulations  of  the  Treasury  Department,  and  of  the  Revised  Statutes  of  the 
United  States  (see  sections  277,  307,  313,  236, 191,  305,  306,  308,  197, 188),  andl  charge 
that  the  "neglect  of  official  duties"  by  the  said  William  Lawrence  while  incumbent 
in  said  office,  and  by  his  willful  intention,  has  prevented  the  "lawful  and  just  hold- 
ers of  the  said  paramount  lien  to  that  of  the  United  States  "  from  receiving  the  benefit, 
security,  and  protection  of  those  statutes  of  the  United  States  enacted  by  Congress 
for  their  especial  protection  of  rights  and  interest  in  the  "files  and  records"  of  the 
Treasury  Department,  and  as  relating  to  their  respective  interests  in  the  aforesaid 
liens,  and  that  such  official  neglect  has  been  followed  by  similar  defaults  and  neglects 
of  other  executive  officers  of  the  Treasury  Department  (as  see  statutes  cited),  as  a 
necessary  consequence  of  the  defaults  of  said  First  Comptroller,  for  which  offenses 
this  attorney  of  the  record  prefers  against  the  said  William  Lawrence,  ex-First 
Comptroller  of  the  Treasury,  Conrad  N.  Jordan,  incumbent  in  office  and  ex-Treas- 
urer of  the  United  States,  now  assistant  treasurer  presiding  over  the  subtreasnry  in 
the  city  of  New  York,  that  they,  and  each  of  them,  are  guilty  of  crimes  against  the 
Government  of  the  United  States,  as  defined  in  the  Revised  Statutes,  sections  5403 
and  5408  thereof. 

The  United  States,  the  defendant  in  this  case,  was  charged  with  all  those  special 
obligations  under  the  terms  of  the  statutes  which  would  pertain  to  any  lawfully 
constituted  security  holders  who,  by  virtue  of  the  mere  fact  of  being  "security 
holders"  in  trust  for  the  cestu  qui  trust,  would  not  permit  the  trustee  to  obtain 
payment  of  the  moneys  due  from  debtor  to  creditor,  and  afterwards  to  deny  any  part 
of  the  trust  which  the  statute,  without  personal  contract  or  written  contract,  would 
impose.  It  is  admitted  and  I  understand  that  the  United  States  is  now  charged 
with  the  duty  of  "  making  the  amount  and  character  of  payments  out  of  the  Treas- 
ury of  the  United  States,"  that  is  declared  in  this  petition  for  relief;  the  petition 


436  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

itself  is  so  framed  that  if,  in  the  judgment  of  the  court,  no  relief  can  be  extended 
to  the  claimants,  the  power  of  the  court  over  the  subject-matter  is  not 
exhausted,  but  it  may  continue  the  case  with  an  amended  petition,  which 
undertake  to  afford  that  relief  contemplated  as  to  the  original  claimants  for  the 
benefit  of  such  persons  as  the  court  may  ascertain  to  be  the  "  lawful  and  just  holders 
of  the  securities"  (the  bonds  in  question),  and  which  have  in  the  original  petition 
been  alleged  to  have  vested  in  Charles  Durkee. 

It  is  assuming  an  absurdity,  which  the  court  should  not  tolerate  from  the  defense, 
that  the  United  States  Government  lirst  knew  me  as  a  claimant  on  record  against 
the  Government.  I  was  not.  It  was  not  until  the  Treasurer  of  the  United  States  per- 
sonally confessed  to  me  the  facts  that  he,  the  said  Conrad  N.  Jordan,  as  Treasurer 
of  the  United  States,  held  himself  accountable  to  me  in  the  sum  of  $04,628,512  (the 
sum  named  to  him  in  the  question)  that  I  sought  the  aid  of  legislation  to  provide  for 
its  payment. 

That  it  was  not  until  this  officer  had  suggested  the  idea — to  mo  personally — that 
legislative  relief  be  sought  for  my  own  relief  and  for  his  authorization  to  pay  this 
demand  that  I  applied  to  the  Senator  (Hon.  S.  M.  Culloui)  of  Illinois  for  such 
legislation. 

May  it  please  the  honorable  court,  that  Senator  can  tell  the  court  for  himself  what 
was  the  purpose  of  the  act  of  March  3,  1887;  that  act  which  directed  the  Secretary 
of  the  Treasury  to  clear  off,  by  payments  out  of  the  Treasury  of  the  United  States, 
the  sums  due  to  "the  lawful  and  just  holders  of  the  lieu  prior  and  paramount  to 
that  of  the  United  States."  (See,  also,  Thurman  Act.) 

And  still,  with  all  the  recognition  of  my  representative  rights  in  such  lien,  offi- 
cially attested  in  the  acts  of  the  accounting  officers  in  the  premises,  by  the  Secretary 
of  the  Treasury,  by  the  Attorney-General,  by  the  First  Comptroller,  and  by  the 
corporations  whose  act  of  making  payments  in  response  to  such  demands  ought  to 
stop  the  mouths  of  all  objectors,  with  all  this  recognition  of  rights,  the  present  Sec- 
retary of  the  Treasury  would  ignore  me  as  a  false  pretender  without  rights  before 
his  Department,  and  as  one  who  had  not  even  tiled  a  claim  against  it  in  form  so  as 
to  make  it  the  subject  of  an  investigation. 

"UNEXPLAINED  POSSESSION  OF  MONEYS." 

I  have  been  instructed  "  that  unexplained  possession  of  moneys  in  the  hands  of 
one  not  the  lawful  owner  is  larceny."  Possession  gained  by  whomsoever,  whether 
he  be  the  Treasurer,  subtreasurer,  or  the  President  of  the  United  States,  of  moneys 
by  law  payable  only  to  other  parties  than  the  United  States  (if  Blackstone  knew 
about  law),  was  a  grand  larceny,  and  as  the  Government  is  incapable  of  committing 
such  an  act,  the  act  attaches  to  the  officers  as  a  personal  offense  against  the  United 
States. 

LEONARD  C.  BLAISDELL. 

Subscribed  and  sworn  to  before  me,  the  undersigned,  this  24th  day  of  May,  1895. 
[SEAL.]  JNO.  T.  PLUMMER,  Notary  Public. 

SUPPLEMENTAL  INFORMATION   BY  AFFIDAVIT. 

It  is  stated  as  information  by  one  who  stood  in  intimate  relation  to  Charles  Dur- 
kee, and  to  whom  he  committed  such  information  in  keeping  as  a  secret  which  he  had 
not  given  to  either  of  his  executors  as  appointed  in  his  will,  that  shortly  before  his 
death  he  called  this  party  to  his  bedside,  and  said  "  that  he  had  had  his  suspicions 
aroused  by  certain  things  that  had  transpired  within  the  last  six  mouths;  that  one 
of  his  intended  executors — if  not  both — had  evil  designs  on  his  estate,  and  that  ho 
had  taken  the  precaution  to  put  his  more  valuable  papers  and  evidences  of  estate 
into  a  certain  '  tin  box/  which  he  pointed  out  to  the  witness,  and  that  he  wished  this 
witness  to  observe  that  it  was  'sealed'  and  directed  to  'The  Metropolitan  National 
Bank  of  the  city  of  New  York;7  that  he  charged  it  as  his  dying  request  upon  this 
witness  that  she  should  keep  watch  over  his  executors,  to  see  that  this  box  was  safely 
consigned  to  said  'Metropolitan  National  Bank,  in  said  city  of  New  York.'" 

This  statement  was  made  the  subject  of  consideration  in  the  Cabinet  meeting  of 
April  22,  A.  D.  1884,  Chester  A.  Arthur  being  President.  At  the  conclusion  of  the 
conference  in  relation  to  the  same  it  was  agreed  between  this  affiant  (L.  C.  Blaisdell) 
and  Secretary  Folger,  on  behalf  of  the  Government,  that  the  said  Secretary  should 
have  the  necessary  authority  to  call  for  and  to  receive,  in  the  name  of  the  said  Blais- 
dell, the  said  "tin  box,"  if  the  same  could  be  found  in  aforesaid  bank,  or  the  con- 
tents, or  any  part  of  the  contents  that  such  box  might  have  contained;  and  that  the 
same  should  be  taken  possession  of  by  the  Solicitor  of  the  Treasury  and  held  for  the 
"joint  use  and  benefit  of  the  heirs  at  law  of  Charles  Durkee  and  the  United  States.' 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  437 

In  tho  presence  of  this  affiant  and  another  witness,  the  Solicitor  of  the  Treasury, 
about  tho  year  and  during  tho  mouth  of  August,  1888,  in  his  office,  stated  that  papers 
of  the  character  described  in  the  above  had  been  delivered  by  the  said  Metropolitan 
National  Hank,  presumably  sOj  he  judged,  from  the  circumstance  of  the  assignment 
of  said  bank  being  found  on  the  books  of  the  Solicitor,  and  containing,  ostensibly, 
"the  assignment  of  all  such  matters  as  were  designated  "  by  the  order  of  the  Secretary 
of  the  Treasury  of  April  22$  A.  D.  1884.  This  affiant  was  not  at  such  time  as  learned 
in  the  law,  or  the  rules  and  regulations  governing  the  Departments,  as  he  believes 
himself  now  to  be,  and  believes  that  the  very  attorney,  whom  he  had  with  him  to 
assist  him,  was  then  in  collusion  with  the  enemies  of  the  Government  and  the 
defendants  in  this  case,  No.  18003,  to  prevent  affiant  from  seeing  said  assignment  and 
judging  for  himself  whether  it  contained  the  matters  and  things  which  he  himself 
and  the  Secretary  of  the  Treasury  had  specified,  and  put  into  an  order  of  the  Secre- 
tary of  the  Treasury  that  it  should  contain,  to  wit,  the  private  papers  of  said  Durkee 
that  should  show  the  assignment  and  delivery  to  said  Durkee  by  Pacific  railroad 
corporations,  designated  in  said  suit,  of  all  the  bonds  so  designated  in  the  petition 
in  said  case. 

Affiant  here  again  states,  as  under  oath,  that  such  order  of  said  Secretary  of  the 
Treasury  was  to  contain  the  private  papers,  and  all  the  private  papers,  whether  let- 
ters, deeds,  bonds,  or  assignments  or  other  character  of  evidences  of  indebtedness  to 
Charles  Durkee  aforesaid,  which  had  at  any  time  come  into  the  possession  or  under 
the  control  of  the  said  Metropolitan  National  Bank  of  the  city  of  New  York  afore- 
said; that  said  Secretary  made  the  proposition  to  receive  from  affiant  such  character 
of  orders  and  to  execute  the  same  at  once;  and  that  said  Secretary  left  the  room  with 
the  last  words  on  his  lips  which  affiant  ever  heard  him  utter,  saying,  "I  will  see 
that  the  order  is  at  once  transmitted  to  the  subtreasury  in  the  city  of  New  York." 

LEONARD  C.  BLAISDELL, 
Attorney  of  Record  of  Case  18003,  Court  of  Claims. 

STATE  OF  INDIANA,  County  of  Marion,  ss: 

Subscribed  and  sworn  to  before  me,  the  undersigned  notary  public,  in  and  for  the 
aforesaid  county  and  State,  this  24th  day  of  May,  1895. 

[SEAL.]  JOHN  T.  PLUMMER,  Notary  Public. 


In  Court  of  Claims.  L.  C.  Blaisdell  v.  The  United  States.  Applicant  for  rule  on  the 
Secretary  of  the  Treasury  to  show  cause  why  judgment  should  not  be  entered 
against  the  United  States  and  in  favor  of  the  petitioners  and  claimants  against 
the  United  States. 

[Final  statement  of  Case  18003.    In  Court  of  Claims.    L.  C.  Blaisdell  v.  Tho  United  States.] 

This  case  was  brought  before  the  honorable  court  through  the  intervention  of  the 
Committee  on  Claims  of  the  Fifty-fourth  Congress,  from  whose  files  it  will  appear 
that  the  plaintiff  had  been  duly  presented  by  a  Member  of  that  Congress,  the  Hon. 
William  M.  Springer,  of  the  State  of  Illinois. 

It  was  filed  in  the  first  instance  by  the  present  claimant,  L.  C.  Blaisdell,  in  behalf 
of  not  only  the  heirs  at  law  of  the  decedent,  Charles  Durkee,  but  in  behalf  of  all 
creditors  of  the  lien  prior  and  paramount  to  that  of  the  United  States,  as  desig- 
nated in  the  several  acts  of  Congress,  1864,  1878,  and  of  the  act  of  March  3,  1887. 

Thus  it  appears  on  the  face  of  the  petition  that  it  was  a  claim  filed  and  founded 
upon  acts  of  Congress,  which  acts  were  in  the  petition  definitely  and  at  length  set 
forth  in  form  and  substance,  and  made  exhibits  for  the  purposes  of  conveying  to  the 
mind  of  the  court  the  foundation  upon  which  all  rights  claimed  by  the  complainants 
in  the  case  were  to  be  ascertained.  The  rights  of  the  complainants,  whatever  they 
shall  be  ascertained  by  the  honorable  court  to  be  or  to  have  heretofore  been,  are  fully 
defined  in  the  Pacific  Railroad  laws  set  up,  designated,  and  plead  in  the  preliminary 
and  informal  petition ;  in  the  more  complete  petition  following  on  the  case  or  matter 
of  the  petition  being  by  the  court  taken  for  consideration  as  in  ex  parte;  and  must 
finally  appear,  not  necessarily  from  any  or  all  of  the  answers  of  the  several  Depart- 
ments, Bureaus,  and  officers  of  the  Government,  the  information  thereby  conveyed 
to  the  court,  but  through  the  information  conveyed  to  the  mind  of  the  court  through 
statutes  of  the  United  States,  and  specific  acts  of  Congress  defining  the  particular 
rights  and  character  of  rights  set  up  and  appearing  in  this  petition. 

It  will  only  be  necessary  to  merely  call  the  attention  of  this  honorable  court  to  the 
acts  of  Congress  that  have  been  duly  presented  to  it  as  the  authority  for  bringing 
this  claim  against  the  United  States,  to  complete  all  the  testimony  in  support  of  the 
claim  herein  presented  that  can  be  required  of  the  complainants  in  the  case  to 
present. 


438  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

The  information  that  lias  been  filed  with  this  honorable  court  by  the  attorney  of 
record  in  the  case — and  that  particular  portion  of  it  which  classifies  as  "official 
mutter,"  certified  by  the  several  Department*,  Bureaus,  and  officers  of  the  Govern- 
ment— disclose  a  state  of  facts  which  precludes  the  possibility  of  there  being  here- 
after, at  any  time,  by  or  through  any  Department,  Bureau,  or  officer  of  the  Govern- 
ment, a  state  of  facts  to  it  presented  that  shall  run  counter  to  or  in  any  material 
form  modify  the  conclusions  which  the  court  may  draw  from  that  which  has  been 
already  thus  presented. 

A  summary  of  these  facts  thus  presented,  and  that  have  been  on  file  with  this  hon- 
orable court  for  the  greater  part  of  the  two  years  last  preceding  the  present  date, 
shows  to  the  honorable  court  all  the  essential  information  necessary  that  it  shall 
have  obtained  before  proceeding  to  enter  final  judgment  in  the  cause  of  the,  com- 
plainants versus  the  United  States. 

As  they  embrace  a  large  part  of  the  history  of  the  Pacific  railroad  system,  their 
operations,  duties,  and  obligations  were  as  expressed  in  the  United  States  statutes; 
and  so  great  a  portion  of  the  detailed  information  is  to  be  conveyed  to  the  court 
through  official  reports  of  the  Auditor  of  Railroad  Accounts  in  the  first  instance  and 
Railroad  Commissioner's  reports  in  the  latter  instances,  it  is  deemed  in  order  to  pre- 
sent first  the  annual  report  of  the  Auditor  of  Railroad  Accounts  to  the  Secretary  of 
the  Interior  for  the  year  ending  .June  30,  1878. 

On  page  6  of  this  report  occur  the  words: 

"The  act  of  Congress  approved  May  7, 1878  (chap.  96,  p.  56  Statute  11,1877-78), 
entitled  '  An  act  to  alter  and  amend  the  act  entitled  ' '  An  act  to  aid  in  the  construction 
of  a  railroad  and  telegraph  line  from  the  Missouri  River  to  the  Pacific  Ocean, 
*  *  *  approved  1862,'"  *  *  *  and  "to  alter  and  amend  act  of  1864,"  in 
amendment  of  said  first-named  act,  requires : 

"That  the  net  earnings  of  said  act  of  1862,  of  said  railroad  companies,  respectively, 
the  Central  Pacific  Railroad  Company  of  California  and  the  Union  Pacific  Railroad 
Company,  shall  be  ascertained  by  deducting  from  the  gross  amount  of  their  earnings, 
respectively,  the  necessary  expenses  paid  within  the  year  in  operating  the  same  and 
keeping  the  same  in  a  state  of  repair,  and  also  the  sum  paid  by  them,  respectively, 
within  the  year  in  discharge  of  interest  on  their  first-mortgage  bonds." 

On  the  first  proposition,  to  wit,  the  amount  paid  by  these  companies  "within  any 
given  year  in  operating  their  railroad  and  telegraph  lines,  and  in  keeping  the  same 
in  a  state  of  repair,"  it  is  not  proposed  to  make  any  remarks  upon;  but  the  second 
proposition,  namely,  "  with  the  amount  paid  by  them,  respectively,  within  the  year 
or  at  any  other  time,  in  discharge  of  interest  on  their  first-mortgage  bonds,"  with 
this  proposition  we  do  propose  to  deal. 

It  is  made  the  basis  of  the  rights  set  up  by  the  complainants  against  the  United 
States  that  the  interest  accrued  upon  these  first-mortgage  bonds,  to  wit: 

Union  Pacific $27,236,512 

Central  Pacific 25,885,120 

Denver  Pacific  Railroad  and  Telegraph  Company  (Western  Pacific) ....       1,  970, 560 

Kansas  Pacific 1,  600, 000 

Central  Branch  Union  Pacific  Railroad  Company 1,  600,  000 

Sioux  City  and  Pacific  Railroad  Company 1,628,320 

A  total  first-mortgage  debt  and  indebtedness  of  lien  prior  and  paramount  to  that 
of  the  United  States  of  $64,623,512,  with  interest  accrued  thereon  at  the  rate  of  6 


per  cent  per  annum,  was,  until  the  dates,  respectively,  March  3,  A.  D.  1883,  and  Janu- 
ary 1,  A.  D.  1885,  the  debt  and  the  expressed  indebtedness  of  these  railroad  and  tele- 
graph companies,  jointly  and  severally,  to  such  parties  and  persons  as  were  expressed 
and  designated  in  "  certain  files  and  records  of  the  Treasury  Department,"  and  which 
were  referred  to  in  these  terms  by  Hon.  William  Lawrence,  First  Comptroller  of  the 
Treasury,  in  Comptroller's  Decision  by  said  William  Lawrence,  under  the  date  of 
December  3,  A.  D.  1884,  and  at  such  date  became,  by  contract,  an  indebtedness  of  the 
United  States. 

That  the  names  of  "the  lawful  and  just  holders  of"  the  said  "lien  prior  and  para- 
mount to  that  of  the  United  States"  have  not  appeared  of  record  within  the  knowl- 
edge of  this  honorable  court,  and  have  never  yet  been  produced  (so  far  as  known) 
before  any  committee  of  either  House  of  Congress,  not  reported  in  any  railroad 
report  required  by  law  to  have  contained  them,  constitutes  no  evidence,  and  no  rebut- 
tal of  the  testimony  that  first-mortgage  creditors  answering  to  that  description  do 
not  exist,  for  we  can  not  consistently  believe  that  when  such  mortgages  of  such 
description  and  of  such  character  of  lien  have  been  so  well  provided  with  protec- 
tion in  the  expressed  provisions  of  the  acts  of  Congress — 1864,  1878,  and  1887 — that 
the  very  "liens"  or  incumbrances  thus  openly  recognized  by  such  acts  of  Congress 
could  exist  independently  of  an  expressed  ownership  of  such  character  of  mort- 
gages in  the  Department  of  the  Treasury  and  the  Department  of  the  Interior,  both 
of  which  said  Departments  contain  the  most  conclusive  evidence  and  recorded 
proofs  that  such  bonds  do  exist. 


GOVERNMENT   DEBT    OF   THE    PACIFIC    RAILROADS.  439 

The  Departments  just  named  have,  it  is  true,  failed  to  produce  the  "evidence" 
called  for  by  the  complainants  in  the  iirst  instance,  and  by  the  honorable  court  in 
the  second  instance,  that  such  mortgage  bonds  do  exist;  but  these  acts  of  Congress 
just  referred  to,  more  especially  the  preamble  to  the  act  of  May  7,  1878,  declare  that 
the  Union  Pacific  Railroad  Company  named  in  this  and  the  other  said  acts  of  Con- 
gress, and  the  Central  Pacific  Railroad  Company  and  others  therein  named,  "did 
and  have  issued"  an  amount  of  "their  own  bonds"  equal  to  the  amount  so  issued 
(as  therein  expressed)  to  them,  and  each  of  them,  by  the  United  States.'7 

Furthermore,  rights  of  owners  of  bonds  thus  issued  are  not,  in  law  or  equity,  to 
be  defeated  by  the  neglect  and  refusal  of  the  said  several  Departments,  or  any  offi- 
cer, bureaus,  or  heads  of  such  Departments  to  make  and  preserve  proper  "  files  and 
records"  of  the  various  transactions  that  may  have  occurred  in  either  one. 

In  pleading  for  the  protection  of  the  rights  of  this  class  of  creditors  of  the  United 
States,  I  shall  submit  for  the  consideration  of  the  honorable  court  the  general 
proposition  that  rights  thus  guaranteed  by  acts  of  Congress  are  not  to  be  defeated 
by  "the  neglect  and  refusal  of  officers  of  the  Government"  ("more  particularly 
the  heads  of  the  two  Departments  last  named)  to  keep,  preserve  for  the  use  of  this 
court,  and  to  present  the  true  and  perfect  record  of  such  transactions  occurring 
therein  as  have  involved  the  credit  of  the  United  States  to  the  total  amount  named 
in  the  said  Pacific  Railroad  bonds." 

The  truth  of  this  last  proposition  I  believe  is  not  questioned  by  any  head  of  any 
Department  of  the  Government  so  far  as  I  have  yet  been  informed,  to  wit,  the 
records  of  the  Treasury  Department  do  disclose  the  "public-debt  statement;  that 
all  interest  accrued  upon  the  said  bonds  are  payable  by  the  United  States."  To 
whom  payable  is  not  disclosed.  That  the  principal  of  the  bonds  ($64,623,512)  is 
also  "payable  by  the  United  States."  To  whom  payable  is  not  disclosed. 

Nor  is  it  disclosed  (by  record  or  information  to  Congress  given)  when,  in  the 
history  of  these  bonds,  that  portion  of  them  became  due  and  payable  which  repre- 
sented "interest  indebtedness  accrued  for  the  period  of  time  which  intervened 
between  issue  of  the  principal  bonds  and  the  date  of  April  22,  1884."  The  plaintiff 
in  the  case  has  alleged  the  fact  of  the  transposition  of  a  specific  and  well-defined 
and  expressed  indebtedness  of  these  corporations  into  an  indebtedness  of  the  United 
States.  The  Treasury  Department  corroborates  the  fact  stated,  that  such  indebted- 
ness has  become  the  indebtedness  of  the  United  States,  but  does  not  show  when  it 
so  became  (debt  payable  by  the  United  States). 

The  Interior  (Railroad  Department  thereof)  carries  the  same  debt  account  under 
the  title  or  name  of  "bond  indebtedness,"  and  charges  the  same  item  against  the 
United  States  as  such,  which  the  Treasury  Department  terms  a  cash  and  "sinking- 
fund  indebtedness."  The  information  is  thus  disclosed  to  the  honorable  court  that 
there  is  a  vast  discrepancy  between  the  "public-debt  statement  of  the  Secretary  of 
the  Treasury  and  that  disclosed  in  the  Department  of  the  Interior.  The  sinking- 
fund  as  shown  by  the  Commissioner  of  Railroads  does  not  show  to  exceed  $27,000,000 
(less  than  $20,000,000  in  1884).  While  the  Treasury  Department  (unless  the  Pacific 
Railroad  Committee,  under  Mr.  Outhwaite,  have  misstated)  shows  $64,000,000  of 
"  sinking-fund  indebtedness  of  the  Government,"  by  reason  of  these  Pacific  Railroad 
obligations,  in  addition  to  that  shown  in  the  Department  of  the  Interior. 

To  prove  that  there  is  a  gigantic  discrepancy  and  erroneous  statement  of  the 
public  liabilities  in  this  respect,  as  between  these  two  Departments,  the  honorable 
court  has  but  to  summon  Mr.  Outhwaite  as  a  witness,  who,  with  13  other  members 
of  that  committee  (in  1888),  declared  "that  the  amount  of  $64,623,512  in  cash"  was, 
on  the  1st  clay  of  January,  1885,  an  "outstanding  liability"  of  the  Government,  by 
reason  of  that  amount  of  cash  having  been  on  that  date  deposited  with  the  Secre- 
tary of  the  Treasury  "  for  the  definitely  ascertained  indebtedness  of  these  several 
Pacific  railroad  companies  to  their  lawful  creditors"  of  the  lien  prior  and  paramount 
to  that  of  the  United  States. 

If  the  liability  of  the  United  States — or  my  statement  of  its  liability  in  this  respect, 
and  as  alleged  in  my  petition,  both  the  original  and  the  amended — has  been  disputed 
by  any  answer,  plea,  or  demurrer  filed  with  this  honorable  court,  I  am  as  yet  not  made 
aware  of  the  fact.  The  statement  has  gone  before  the  Department  of  the  Treasury, 
signed  and  sworn  to  as  set  forth  in  my  affidavits,  and  stands  unchallenged,  so  far  as 
I  know. 

The  order  of  the  court  for  the  information  that  would  deny  the  truth  of  the  state- 
ment has  gone  forth  and  does  not  bring  the  information  that  would  deny  it. 

The  statement  has  stood  in  form  and  in  print  before  the  eyes  of  every  Secretary  of 
the  Treasury  from  the  date  of  January  12,  1889,  and  not  one  has  attempted  to  deny 
it  or  make  any  official  answer  tending  to  deny  the  truth,  substantially,  of  my  state- 
ments as  in  petition  contained.  The  President  of  the  United  States  (Benjamin 
Harrison,  while  Chief  Executive)  caused  all  my  statements  to  be  placed  before  him- 
self, in  official  capacity,  and  in  official  capacity  referred  them  "for  the  official 
action"  (note  the  words)  of  the  Secretary  of  the  Treasury.  The  Supreme  Court,  in 
99  United  States  Reports,  supports  the  statement  of  my  petition,  that  the  United 


440  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

States  is  debtor  to  the  "sinking  fund"  and  in  favor  of  "the  lawful  and  just  holders 
of  paramount  lien,"  as  stated,  "to  the  full  amount  of  the  deposits  made  under  the 
provisions  for  such  sinking  fund  as  contained  in  the  act  of  May  7,  1878."  The  com- 
mittee referred  to  last  has  the  information  that  the  sum  of  $64,623,512  i,s  and  lias 
been  withheld  from  "the  possession  of  the  lawful  and  just  holders  of  such  para- 
mount lien  by  each  and  every  Secretary  of  the  Treasury,  on  the  plea,  or  notion, 
rather,  that  such  officer  held  a  discretionary  authority  to  make  of  such  fund  a  sinking 
fund." 

Congress,  by  act  of  March  3,  1887,  directed  that  officer  "to  clear  off  such  para- 
mount lien  or  incumbrance  by  payments  (by  payments,  mark  the  words)  out  of  the 
sinking  fund,"  and  provided  that  the  entire  amount  be  paid,  whether  the  sinking 
fund  was  more  or  less  than  the  amount  due  to  the  lawful  owners  of  such  bonds,  or 
the  "lawful  creditors  of  the  paramount  lien  aforesaid. " 

For  this  disobedience  of  the  requirement — the  direct,  positive,  and  special  order  of 
Congress — the  present  incumbent  in  that  office  is  answerable.  He  can  not  and  docs 
not  answer  either  Congress  or  this  honorable  court  that  he  knows  not  the  lawful 
creditors  of  the  United  States;  that  he  has  no  legal  knowledge  of  them  that  he  is 
bound  by  law  to  take  cognizance  of. 

He  appears  to  rest  contentedly  upon  "want  of  information,  such  information  as 
would  create  an  offici.il  liability  on  his  part  to  answer"  the  demands  made  by  me  on 
the  United  States  Treasury.  He  acts,  or,  rather,  neglects  to  act;  and  rests  upon  the 
assumption  that  his  neglect  and  refusal  to  answer  me  in  official  manner,  either  by 
affirmation  or  by  denial  of  the  claims  I  have  filed,  prevents  the  consummation  of  my 
purpose  to  enforce  an  accounting  from  him;  and  he  acts  as  if  he  expected  that  the 
entire  body  of  Congress  and  the  Supreme  Court,  including  this  honorable  court, 
would  unitedly  be  unable  to  compel  him  either  to  affirm  or  deny  my  right  to  an 
accounting,  and  thus  prevent  not  only  myself  and  iny  clients  from  obtaining  the 
benefits  of  those  acts  of  Congress  upon  which  we  rely  for  protection,  but  that  all 
possible  creditors  of  such  lien,  as  Congress  provided  should  be  secured  to  "  its  law- 
ful holders"  (should  others  than  myself  and  clients  prove  to  be  the  "lawful  bene- 
ficiaries"), would  be  powerless,  and  the  courts  named,  and  Congress  itself,  be  power- 
less to  enforce  against  his  will  the  payment  of  the  sums  due. 

With  these  statements  I  have  concluded  to  include  the  following  motion :  That  the 
Secretary  of  the  Treasury  be,  and  with  the  approval  of  this  honorable  court  is 
hereby,  ordered  to  show  cause,  by  his  personal  appearance  before  this  honorable 
court,  at  the  next  ensuing  rule  day,  why  judgment  should  not  be  rendered  in  behalf 
of  the  petitioners  and  claimants  in  said  case  and  cause,  No.  18003,  in  accordance  with 
the  statement  of  claims  against  the  United  States  made  to  this  honorable  court. 
Very  respectfully  submitted  by 

Attorney  of  Record  in  Case  No.  18003. 
To  the  Honorable  Chief  Justice  and  Judges  thereof. 


[In  the  Court  of  Claims  of  the  United  States.    Term  1894-1895.    Leonard  C.  Blaisdell,  attorney  in 
fact,  etc.,  et  al.,  v.  The  United  States.    No.  18003.    Filed  March  6,  1895.] 

AMENDED   TETITION. 

The  claimants,  Leonard  C.  Blaisdell,  attorney  in  fact  for  the  following-named  heirs 
at  law  of  Charles  Durkee,  late  a  citizen  of  the  United  States,  now  deceased,  to  wit : 

George  Durkee,  Joseph  Durkee,  Charles  C.  Durkee,  Harvey  Durkee,  Martha  K. 
Durkee,  Bessie  Durkee,  John  Durkee,  Charles  E.  Durkee,  Harriet  Fluent,  Mary  L. 
Hendrix,  Caroline  C.  Johnson,  Charles  L.  Boardman,  Harriet  Boardman,  Henry 
Boardman,  Jessie  H.  Moneghan,  May  A.  Fargo,  Ellen  Church,  Mary  L.  Furness, 
Laura  A.  Huntington,  Louiza  Hoag,  and  Harriet  L.  Blaisdell  (who  is  the  wife  of 
Leonard  C.  Blafsdell),  for  their  amended  petition  herein  say: 

I. 

That  they  are  all  citizens  of  the  United  States;  that  their  said  attorney  in  fact 
resides  at  Champaign,  in  the  State  of  Illinois;  that  they  are  the  sole  and  only  heirs 
at  law  of  said  Charles  Durkee,  deceased;  that  they  and  their  said  attorney  in  fact 
have  always  yielded  true  allegiance  to  the  United  States,  and  that  they  are  the  sole 
owners  of  the  claim  herein  sued  upon. 

II. 

That  the  said  Charles  Durkee,  during  his  life,  was  lawfully  possessed  and  was  the 
owner  of  certain  prior  and  paramount  lien  bonds  of  the  Union  and  Central  Pacific 
railroad  companies,  which  bonds  had  been  issued  by  said  companies  through  their 
officers  and  agents  in  the  construction  and  equipment  of  said  railroads,  and  which 
bonds  were  of  the  value  and  amount  of  sixty-four  million  six  hundred  and  twenty- 
three  thousand  live  hundred  and  twelve  dollars  ($64,623,512.00),  and  that  said  bonds 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  441 


subsequently  were  deposited  in  the  Treasury  Department  of  the  United  States,  or 
in  a  subtreasury,  to  be  hold  by  the  United  States  in  trust  for  the  use  and  benefit  of 
the  owners  thereof,  and  their  payment  was  guaranteed  by  the  Government  of  the 
United  States,  and  the  claimants  say  that,  by  virtue  of  being  the  heirs  at  law  of 
said  decedent,  and  by  virtue  of  the  premises,  they  became  at  his  decease  the  lawful 
owners  of  the  bonds  aforesaid. 

III. 

That  the  Government  of  the  United  States,  pursuant  to  law,  collected  of  and  from 
the  said  Union  and  Central  Pacific  railroad  companies  the  said  sum  of  sixty-four 
million  six  hundred  and  twenty-three  thousand  five  hundred  and  twelve  dollars 
(&B4,623,512.00),  and  now  holds  the  same  for  the  protection,  security,  and  benefit  of 
the  lawful  and  just  holders  of  any  mortgage  or  lien  debts  of  such  companies, 
respectively,  lawfully  paramount  to  the  rights  of  the  United  States,  but  the  United 
States  have  neglected,  failed,  and  refused  to  pay  the  same  over  to  these  claimants  as 
the  heirs  at.law  of  said  decedent,  and  who  are  the  lawful  owners  of  the  said  bonds, 
and  are  lawfully  and  justly  entitled  to  the  sum  of  money  aforesaid,  although  often 
requested  so  to  do  by  the  claimants,  and  that,  notwithstanding  the  premises,  that 
sum  is  now  retained  in  the  Treasury  or  in  a  subtreasury  of  the  United  States. 

IV. 

And  the  claimants  say  that  they  are  justly  entitled  to  the  sum  aforesaid,  on  account 
of  said  bonds  and  of  the  premises  hereinbefore  stated,  and  that  the  said  sum  is  justly 
due  and  owing  to  them  from  the  United  States,  and  is  wholly  unpaid. 

V. 

And  the  claimants  further  say  that  they  have  made  the  allegations  in  their  said 
amended  petition  as  specific  and  accurate  as  they  are  able  to  do  from  the  data  in  their 
possession,  the  accurate  and  specific  information  therein  being  in  possession  of  the 
defendant,  and  they  wish  to  reserve  their  right  to  further  amend  said  petition  should 
the  allegations  herein  be  properly  amendable  in  the  light  of  further  information. 

Wherefore  The  claimants  demand  judgment  against  the  United  States  in  the  sum 
of  sixty-four  million  six  hundred  and  twenty-three  thousand  five  hundred  and 
twelve  dollars  ($64,623,512.00)  and  all  proper  relief  in  the  premises. 

LEONARD  C.  BLAISDELL, 
Attorney  in  Fact  and  one  of  the  Petitioners. 

DUDLEY  &  MICIIENEI?,  Attorneys. 

CHANEY  &  GARRISON,  Counsel. 

DISTRICT  OF  COLUMBIA,  City  of  Washington,  ss : 

Before  me,  a  notary  public  in  and  for  said  District,  personally  appeared  Leonard 
C.  Blaisdell,  who,  being  duly  sworn,  upon  his  said  oath  says  that  he  is  one  of  the 
petitioners  in  the  foregoing  petition,  has  read  and  understands  the  same,  and  that 
the  allegations  set  forth  therein  are  true  to  the  best  of  his  knowledge  and  belief. 

L.  C.  BLAISDELL. 

Subscribed  and  sworn  to  before  me  this  4th  day  of  March,  A.  D.  1895. 

[SEAL.]  L.  P.  SQUIER,  Notary  Public. 

Mr.  Blaisdell  continued  his  statement  as  follows: 

I  think  that  the  proposition  that  the  Government  is  a  trustee  over  the 
funds  in  the  sinking  fund  for  the  security,  benefit,  and  protection  of 
the  lawful  creditors  of  the  paramount  lien  will  not  be  dissented  from 
by  the  honorable  committee.  Nor  do  I  hesitate  to  say  that  I  believe 
the  committee  will  not  dissent  from  the  proposition  that  the  Secretary 
of  the  Treasury  is  (under  the  provisions  of  the  act  of  March  3,  1887) 
charged  with  the  duty  of  using  the  sinking  fund  for  the  satisfaction  of 
the  paramount  lien  obligations ;  nor  from  the  proposition  that  such  officer 
has  not  satisfied  one  dollar  of  such  obligations;  nor  from  the  proposi- 
tion that  claimants  have  been  before  the  Treasury  Department,  appear- 
ing for  the  satisfaction  of  such  obligations  for  more  than  ten  years  past. 
Nor  will  the  committee  dissent  from  the  proposition  that  the  Government 
should  either  cause  these  obligations  to  be  satisfied  according  to  law 
or  renounce  the  trust  and  allow  such  paramount  lien  creditors  to  resort 
to  the  courts  in  suits  against  the  Pacific  Railroad  corporations  to  enforce 
their  rights, 

Adjourned. 


442  GOVERNMENT    DRBT    OF    THE    PACIFIC    RAILROADS. 

WASHINGTON,  D.  0.,  March  24, 1896. 
The  committee  met  at  11  a.  m.    Present,  Senator  Gear,  chairman. 

THE  UNION  PACIFIC. 
STATEMENT  OF  MR.  JOHN  ROONEY. 

Mr.  John  Rooney,  of  New  York,  representing  bondholders  of  the 
Union  Pacific  llailroad  Company,  not  parties  to  tlic  reorganization  plan, 
appeared  before  the  committee  and  submitted  the  following  statement: 

Bill  for  Government  commissioners  to  execute  a  plan,  indicated  by  Con- 
gress, for  the  compulsory  redemption  of  the  first  and  Government  debts 
at  par  in  cash;  the  payments  to  be  made  by  the  present  junior  bond- 
holders and  the  stockholders,  who  shall  invest  the  requisite  amounts  in 
interest-bearing  mortgage  bonds. 

This  plan,  propounded  in  the  bill  which  we  had  the  honor  to  submit, 
is  simply  the  application  to  the  collection  of  the  Government  mort- 
gages of  the  methods  pursued  every  day  by  private  interests  in  rail- 
roads. Practically  there  can  be  no  competitive  cash  bidding  for  such 
colossal  properties.  The  best  market  of  the  creditors,  requiring  the 
adequate  payment  of  their  claims,  consists  in  the  junior  bonds  and 
stocks  interested  to  save  their  equities  from  foreclosure.  In  the  case 
of  these  railroads,  the  earnings  furnish  to  the  junior  claimants  a  desira- 
ble investment,  which  it  would  be  folly  for  them  to  reject,  at  the  risk 
of  losing  their  great  interest  in  the  probable  increased  revenues  of 
these  properties. 

With  these  certain  elements,  based  upon  the  present  actual  earnings 
of  the  aided  divisions,  on  which  Congress  can  predicate  the  Govern- 
ment plan  of  reorganization,  why  resort  to  the  aleatory  method  of 
authorizing  certain  officials  to  assess  the  value  of  the  Government's 
mortgages'?  These  properties  are  worth  just  what  the  stocks  will  pay 
for  them  under  the  pressure  of  foreclosure.  This  can  not  be  ascer- 
tained except  by  process  of  foreclosure,  modified  as  to  all  junior  inter- 
ests by  providing  them  with  substantial  securities  to  represent  their 
proportions  of  the  redemption  of  the  superior  liens.  It  is  upon  such 
an  assured  basis  that  this  bill  proceeds,  providing  for  the  execution  of 
the  necessary  administrative  details  by  commissioners. 

The  method  adopted  in  this  bill  is  simply  the  normal  course  contem- 
plated by  the  contracts  for  the  benefit  of  creditors  who  have  stipu- 
lated for  a  superior  mortgage  and  which  is  followed  by  business  men 
every  day  in  the  year.  Why  should  the  Government  alone  divest  itself 
of  these  remedies?  These  great  properties  are  not  worth  merely  what 
any  three  or  four  worthy  officials  may  declare  them,  upon  problematical 
data,  to  be  potentially  worth,  but  what  the  law  of  the  land,  acting  in 
its  ordinary  course  upon  subordinate  and  imperiled  interests,  may 
actually  ascertain  it  to  be  worth  to  them. 

In  corroboration  of  the  practical  nature  of  this  remedy  we  submit 
the  following  concrete  considerations,  which  bear  forcibly  upon  the 
minds  of  stockholders  called  upon  to  make  investments  in  such  new 
securities  as  are  provided  in  this  plan : 

Present  increase  of  revenues. — The  recent  reports  for  the  completed 
year  1895  show  a  rate  of  increase  in  Union  Pacific  earnings  which 
enhances  the  importance  to  the  stockholders  of  saving  their  shares  by 
paying  the  Government  debts  through  subscriptions  to  substituted 
bond  issues  of  intrinsic  value. 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS.  443 

Increase  of  price  of  junior  securities  has  always  foil  owed  the  payment 
of  heavy  assessments  and  the  restoration  of  the  solvency  of  the  com- 
panies. In  this  way  the  stock  has  generally  promptly  recouped  itself 
for  its  outlay,  which,  in  this  case,  would  be  a  result  additional  to  the 
investment  in  a  desirable  security. 

Success  of  tlic  assessment  plan  wlien  employed  by  individual  mortgage 
holders  now  invoiced  for  the  Government  and  its  fellow -interests.  The 
New  York  Times  of  February  9  contains  such  apposite  material  on  this 
point  that  we  venture  to  quote  from  it: 

"If  the  Government  had  simply  asked  payment  in  the  same  way  that 
a  corporation  asks  payment  for  an  issue  of  its  securities — that  is,  by 
certified  checks — it  would  never  have  been  anything  but  a  question  of 
how  many  times  over  the  loan  would  have  been  subscribed;  for  the 
sum  of  $100,000,000  is  but  a  drop  in  the  bucket  as  compared  with  the 
wealth  of  the  country.  See  the  proof  of  it.  Three  bankrupt  corpora- 
tions have  just  called  upon  certain  classes  of  their  security  holders  for 
new  money,  in  the  way  of  assessments  and  otherwise — not  to  buy  Gov- 
ernment bonds,  but  to  preserve  an  equity  of  more  or  less  doubtful  value 
in  these  bankrupt  properties — and  all  of  these  demands  have  already- 
been  met  or  are  being  met,  as  follows:  Beading,  $28,000,000;  Atclii- 
son,  $14,000,000;  Erie,  $10,000,000. 

"Here  is  a  total  of  $52,000,000  cash,  paid  up  by  a  limited  number  of 
people  under  most  discouraging  conditions;  in  the  case  of  the  Reading 
the  new  assessment  following  one  of  $15,000,000  levied  in  $1889.  We 
leave  out  the  numerous  other  assessments  of  millions  levied  within  the 
past  eighteen  months  or  two  years — as  the  Eichmond  Terminal,  of 
$18,000,000." 

Many  similar  instances  could  be  added. 

In  the  face  of  these  amounts  of  assessments  raised  upon  the  stocks 
of  roads  inferior,  in  most  instances,  to  these  bond-aided  properties,  and 
with  new  stock  merely,  instead  of  good  bonds,  being  given  to  the  sub- 
scribers, it  would  be  inefficient  on  the  part  of  the  Government  not  to 
direct  its  commissioners  to  pursue  this  rightful  remedy. 

Since  our  last  statement  before  the  committee  several  plans  of  reor- 
ganization have  been  based  on  the  requirement  of  payments  from  the 
stock  to  avoid  forfeiture.  The  Oregon  Short  Line,  one  of  the  Union 
Pacific  connecting  roads,  has  levied  $12  per  share  on  its  stockholders. 
The  Northern  Pacific  requires  its  stockholders  to  pay  $15  per  share. 
For  these  assessments  the  stockholders  receive  only  new  stock.  Con- 
trast these  onerous  levies  with  the  subscription  to  well-secured  interest- 
bearing  bonds  on  these  Pacific  railroads. 

In  view  of  these  everyday  financial  occurrences,  it  is  not  surprising 
that  the  statutes  of  New  York  establish  this  equity  of  redemption  as 
an  individual  right  of  each  stockholder.  Under  these  acts  each  stock- 
holder has  the  privilege  of  redeeming  the  prior  mortgages,  in  the  pro- 
portion which  his  stock  bears  to  the  total  issue.  (Stock  Corporation 
Laws  of  1892,  sec.  49.) 

It  is  not  to  be  expected  that  junior  claimants  will  voluntarily  oifer 
the  best  terms  of  redemption.  Therefore,  the  plain,  straightforward 
course  by  which  a-11  mortgages  are  collected  should  not  be  deviated 
from  in  favor  of  the  junior  claims  on  these  aided  railroads.  The 
correlative  of  foreclosure  is  payment,  and  this  bill  merely  provides  the 
machinery  to  facilitate  the  inferior  interests,  in  making  their  propor- 
tionate payments  into  a  common  fund,  for  the  discharge  of  the  mortgages 
of  which  the  Government  is  a  holder. 

Under  our  plan  the  Government  has  absolutely  no  concern  with  these 


444  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

items.  If  the  Government  were  going  to  operate  tlie  roads  these  ele- 
ments would  be  measurably  involved.  But  we  propose  that  the  Gov- 
ernment and  the  first  mortgages  be  paid  in  cash — by  subscriptions  to 
the  new  securities  of  a  reorganized  company,  to  be  issued  for  those  cash 
payments.  The  annual  interest  charge  for  these  new  securities  is  based 
upon  the  official  returns  of  the  annual  earnings  of  the  subsidized 
divisions,  excluding  nonaided  line,  terminals,  and  bridge.  When  the 
Government  is  paid  by  the  present  stockholders — who  take  transfers 
of  the  first  and  second  mortgages — those  stockholders  secure  the  reten- 
tion of  their  present  interests  in  the  aided  lines. 

Their  interests  in  the  nonaided  lines  will  not  have  been  affected,  and 
of  course  they  retain  them  likewise.  They  can  reorganize  them  or  let 
their  securities  remain  as  they  are.  But,  in  any  event,  the  aided  and 
nonaided  lines,  the  terminals,  and  the  bridge  remain  united  in  the  same 
ownership  as  at  present.  Hence  there  is  no  use  in  discussing  whether 
the  Supreme  Court  was  right  in  holding  that  the  Government  lien  cov- 
ers the  bridge;  nor  is  it  important  to  consider  the  earnings  of  the  non- 
aided  line,  which  are  only  one  twenty-fourth  of  the  whole;  nor  to 
attempt  to  value  terminals,  which  would  be  of  little  value  unless  used 
by  the  aided  divisions.  Indeed,  it  is  this  very  ownership  of  these  trun- 
cated morsels  which  renders  it  more  desirable  to  the  juniors  and  stocks 
to  subscribe  to  the  new  issue  of  bonds,  in  order  to  utilize  those  weaker 
properties.  After  their  compliance  with  the  terms  of  this  reorganiza- 
tion, they  would  own  and  operate  exactly  the  same  railroad  properties 
which  they  now  own  and  operate.  Only  the  personnel  of  the  creditors 
would  be  changed — from  the  Government  to  the  individual  stockholders. 

The  occasion  for  contemplating  consolidation  in  the  interest  of  the 
Government  arises  from  the  fact  that  there  is  an  excess  of  revenues 
on  the  Union  Pacific  beyond  the  amount  necessary  to  pay  the  Govern- 
ment, while  on  the  Central  Pacific  there  is  a  deficiency.  If  the  surplus 
on  the  Union  and  Kansas  Pacific  (about  $900,000)  could  be  utilized  as 
the  basis  for  capitalizing  a  further  amount  of  four-and-a-half  bonds, 
twenty  millions  more  of  the  Central  Pacific  debt  could  be  paid  to  the 
Government.  This  could  be  effected  by  the  commissioners  providing 
in  the  plan  for  the  sales  of  both  roads  as  an  entirety.  They  could  pro- 
vide for  the  formation  of  a  single  corporation  to  own  both  roads.  This 
company  should  issue  mortgage  bonds  predicated  upon  the  earnings  of 
both  lines  as  an  entirety.  There  would  then  be  $7,500,000  of  annual  net 
revenues,  ample  to  apply  to  the  interest,  at  4£  per  cent,  on  $165,000,000 
of  debt — the  net  aggregate  of  the  first  and  Government  mortgages  on 
the  three  roads.  The  subscription  to  these  bonds  by  the  present  stock- 
holders and  junior  bondholders  would  furnish  the  condition  for  their 
avoidance  of  foreclosure  and  obliteration.  Of  this  amount  the  com- 
missioners are,  by  the  act,  required  to  reserve  ten  millions,  to  secure  the 
independent  outlet  to  the  Pacific. 

The  present  road  from  San  Jose  to  the  Pacific  would  not  be  of  much 
value  if  a  new  road  were  built,  so  that  its  owners  would  probably  be 
willing  to  make  a  proper  arrangement  for  its  use  with  the  new  company. 
But  if  it  had  to  be  built,  the  Government  commissioners  could  turn  over 
to  the  new  company  ten  millions  of  the  interest-bearing  bonds,  retaining 
an  additional  ten  millions  (to  bear  interest  when  earned),  as  explained 
in  our  previous  statement. 

The  practical  question  would  be  the  distribution  of  the  stock  of  the 
consolidated  company,  as  between  the  present  stockholders  of  the  Union 
and  Central.  As  the  Union  Pacific  would  furnish  the  greater  propor- 
tion of  revenues  to  the  consolidated  company,  as  well  as  a  lesser  debt, 


GOVERNMENT    DEBT    OP    THE    PACIFIC    RAILROADS.  445 

it  would  seem  that  its  stockholders  should  have  a  proportionately 
increased  amount  of  the  consolidated  stock.  This  could  be  reached  by 
an  arithmetical  calculation.  There  is  nothing  in  the  bill  as  now  drafted 
which  militates  against  consolidation.  But  as  it  would  be  so  valuable 
to  the  Government,  we  have  suggested  a  clause  to  cover  it  in  the  list  of 
amendments  appended. 

Attorney-General  Gluey  has  held,  in  an  elaborate  written  opinion, 
that  the  transportation  credits  of  the  Central  Pacific  are  applicable 
only  to  the  interest  account  on  the  subsidy  bonds — not  to  the  principal  of 
those  bonds.  Hence,  the  failure  of  the  Central  Pacific  to  pay  the  cur- 
rency sixes,  which  fell  due  January  16,  1895,  constitutes  a  default,  for 
which  the  road  is  foreclosable  by  the  United  States. 

It  must  be  apparent  that  the  coercive  method,  adapted  in  this  bill 
from  the  prevailing  system  of  railroad  reorganization,  is  certain  to  pro- 
duce the  best  possible  price  for  the  prior  mortgages.  It  is  not  to  be 
supposed,  in  the  nature  of  things,  that  the  junior  interests  in  these  prop- 
erties are  coming  forward  voluntarily  to  offer  the  firsts  and  the  Govern- 
ment the  highest  price  of  which  the  property  is  susceptible  for  their 
interests.  As  there  are  just  about  enough  earnings  to  sustain  the 
capitalization  for  bringing  the  firsts  and  the  Government  "out  whole," 
it  is  not  surprising  to  find  the  juniors  and  stocks  maneuvering  to  get 
the  prior  mortgages  to  share  these  present  earnings  with  them,  instead 
of  their  awaiting  a  partial  resumption  of  the  old  scale  of  revenues. 

As  matter  of  fact,  they  will  derive  considerable  advantage  from 
the  reduction  in  the  rate  of  interest  upon  the  new  issues,  substituted 
for  the  present  6  per  cent.  And  with  the  income  bonds  (which  the  com- 
missioners would  likely  accord  them,  in  lieu  of  their  present  fixed-charge 
securities,  and  in  addition  to  the  new  superior  mortgages  which  they 
would  receive  for  their  subscriptions)  they  would  get  all  out  of  the 
property  to  which  they  are  equitably  entitled.  In  any  event,  the 
Government,  through  its  commissioners  (being  its  own  committee  of 
reorganization),  would  act  directly  upon  each  junior  bondholder  and 
stockholder,  endeavoring  to  protect  the  future  of  his  investment.  No 
syndicate  could  interpose  between  the  Government  and  the  just  pay- 
ment of  more  than  $100,000,000  into  its  Treasury,  as  well  as  the  protec- 
tion of  its  prior  lienors,  the  first-mortgage  bondholders. 

No  legislation  is  better  than  the  proposed  sacrifices  of  the  first  and 
Government  mortgages,  because  we  hold  that  the  Government  would 
be  better  off  not  to  go  on  at  the  present  time,  but  to  wait  for  another 
year.  The  Government  will  not  lose  anything  by  waiting  for  another 
session  of  Congress. 

Propositions  are  being  pushed  before  Congress  to  enable  their  pro- 
moters to  avail  themselves  of  the  minimum  condition  of  earnings  as 
the  basis  for  obtaining  the  most  favorable  terms  from  the  Government. 
The  recent  percentage  of  improvement  in  transportation  business  is 
expected  by  the  commercial  community  to  increase,  so  that,  in  all 
probability,  the  junior  bonds  and  stocks  will  make  better  propositions 
to  Congress  next  year. 

Meanwhile,  the  financial  relations  of  these  roads  to  the  Government 
will,  in  all  likelihood,  remain  in  statu  quo.  In  the  opinion  of  the  Gov- 
ernment counsel,  Hon.  George  Hoadley,  there  can  be  no  foreclosure 
against  the  United  States  as  to  the  right  of  retention  of  Government 
earnings;  he  holds  that  the  Government  liens  were  never  subordinated 
in  this  respect  to  the  first  mortgages,  thus  retaining  a  very  considerable 
prior  security  to  the  United  States.  Furthermore,  the  President  is 
required  by  the  act  of  1887  to  take  up  overdue  first-mortgage  bonds 
when  safety  for  the  Government  liens  requires. 


446  GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 

The  total  amount  of  the  first  mortgages  on  all  the  roads  which  have 
matured  and  will  mature  before  January,  1897,  is  $11,000,000.  If  there 
should  be  a  serious  attempt  to  foreclose  the  first  mortgage,  the  Presi- 
dent would  be  constrained  to  execute  the  act  of  1887  by  directing  the 
payment  "out  of  the  Treasury"  of  the  overdue  installments. 

Of  course,  if  Congress  adopts  the  assessment  plan  for  the  full  pay- 
ment of  the  firsts  and  the  Government,  no  more  could  be  required,  and, 
therefore,  nothing  coirikl  be  gained  by  awaiting  next  session.  But  no 
action  is  better  for  the  firsts  and  the  Government  than  selling  to  these 
subordinate  debtors,  on  terms  fixed  by  them,  under  the  most  adverse 
conditions  of  the  properties. 

This  bill  simply  provides  the  machinery  for  the  Government,  which 
individual  holders  of  prior  mortgages  provide  for  themselves. 

Individual  holders  select  committees  to  frame  plans  of  reorganization, 
whereunder  junior  interests  may  absolve  themselves  from  extinction  by 
foreclosure,  through  assessment  payments  for  the  benefit  of  superior 
incumbrances.  This  bill  provides  for  the  appointment  of  commissioners 
to  perform  those  functions,  under  the  directions  prescribed  by  Congress 
in  this  act. 

The  first  step  of  the  commissioners  would  be  the  issuing  of  notices  to 
the  junior  bondholders  and  stockholders,  as  follows: 

That  the  first  and  Government  mortgages  are  in  process  of  fore- 
closure. [The  first-mortgage  foreclosures  on  the  Union  and  Kansas 
Pacific  are  now  pending.  The  other  proceedings  wrould  have  been 
theretofore  initiated.] 

That  before  a  day  named  they  should  comply  with  the  act  of  Con- 
gress requiring  them  to  subscribe  to  new  issues  of  bonds  sufficient  to 
discharge  the  Government  holdings  of  first  and  second  incumbrances, 
and  such  individual  holdings  of  first  mortgages  as  do  not  exchange. 
[The  issues  and  rates  of  interest  to  be  fixed  in  the  notices,  subject  only 
to  the  exigency  that  they  be  productive  of  the  full  amount  required.] 

That  the  present  first-mortgage  individual  holders  notify  the  commis- 
sioners before  a  day  certain  (to  precede  the  return  date  of  the  foregoing 
notice  to  stockholders)  whether  they  elect  to  accept  the  new  issues  or 
the  cash  payment. 

Should  any  of  the  junior  interests  fail  to  make  the  subscriptions  at 
the  dates  named,  the  commissioners  would  offer  their  interests  to  the 
investing  public.  In  return  for  their  subscriptions  they  would  receive 
not  only  the  issues  of  new  bonds,  but,  in  addition,  they  would  be  allotted 
the  same  stock  interests  which  the  present  holders  had  forfeited  (to  be 
enforced  by  the  foreclosure)  by  the  failure  to  subscribe. 

Upon  the  sale  under  foreclosure  the  commissioners  would  bid  in  the 
property  for  the  amount  of ,  the  Government  firsts  +,  the  indi- 
vidual firsts  who  agreed  to  exchange  +,  and  the  Government  mortgages. 

This  would  be  a  minimum  of  $113,000,000,  payable  in  firsts  and  Gov- 
ernment claims. 

The  new  company  would  be  formed,  and  would  issue  the  new  securi- 
ties to  the  commissioners  in  exchange  for  their  deeds  of  the  properties. 
The  commissioners  would  deliver  the  new  securities,  according  to  the 
subscriptions  and  allotments  made.  The  payments  therefor  in  cash 
would  be  turned  into  the  United  States  Treasury. 

We  propose,  in  case  the  committee  so  desire,  to  take  the  amount  of 
the  Government  claim — principal  and  interest — with  such  additional  as 
may  be  needed  to  take  up  the  first-mortgage  bonds,  or  to  take  up  the 
first-mortgage  bonds  belonging  to  those  bondholders  who  may  refuse 
to  exchange  them  for  the  new  issue.  And  we  will  undertake  to  do  so 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  447 

for  20  per  cent,  and  to  pay  cash  for  the  whole  amount  of  the  Govern- 
ment debt,  principal  and  interest. 

Mr.  Rooney  presented  the  following  plan,  and  said  that  in  a  few  days 
he  would  submit  other  papers  to  the  committee: 

REORGANIZING   THE   ROADS   AS  AN   ENTIRETY — CONSOLIDATION. 

The  occasion  for  contemplating  consolidation  in  the  interest  of  the  Government 
arises  from  the  fact  that  there  is  an  excess  of  revenues  on  the  Union  Pacific  beyond 
the  amount  necessary  to  pay  the  Government,  while  on  the  Central  Pacific  there 
is  a  deficiency.  If  the  surplus  on  the  Union  and  Kansas  Pacific  (about  $900,000) 
could  be  utilized  as  the  basis  for  capitalizing  a  further  amount  of  4£  bonds, 
twenty  millions  more  of  the  Central  Pacific  debt  could  be  paid  to  the  Government. 
This  could  be  effected  by  the  commissioners  providing  in  the  plan  for  the  sales 
of  both  roads  as  an  entirety.  They  could  provide  for  the  formation  of  a  single 
corporation  to  own  both  roads.  This  company  should  issue  mortgage  bonds 
predicated  upon  the  earnings  of  both  lines  as  an  entirety.  There  would  then  be 
$7,500,000  of  annual  net  revenues,  ample  to  apply  to  the  interest  at  44  per  cent 
on  $165,000,000  of  debt,  the  net  aggregate  of  the  first  and  Government  mortgages  on 
the  three  roads.  The  subscription  to  these  bonds  by  the  present  stockholders  and 
junior  bondholders  would  furnish  the  condition  for  their  avoidance  of  foreclosure 
and  obliteration.  Of  this  amount  the  commissioners  are  by  the  act  required  to 
reserve  ten  millions  to  secure  the  independent  outlet  to  the  Pacific.  The  present 
road  from  San  Jose  to  the  Pacific  would  not  be  of  much  value  if  a  new  road  were 
built;  so  that  its  owners  would  probably  be  willing  to  make  a  proper  arrangement 
for  its  use  with  the  new  company.  But,  if  it  had  to  be  built,  the  Government  com- 
missioners could  turn  over  to  the  new  company  ten  millions  of  the  interest-bearing 
bonds,  retaining  an  additional  ten  millions  (to  bear  interest  when  earned),  as 
explained  in  our  previous  statement. 

The  practical  question  would  be  the  distribution  of  the  stock  of  the  consolidated 
company  as  between  the  present  stockholders  of  the  Union  and  Central.  As  the 
Union  Pacific  would  furnish  the  greater  proportion  of  revenues  to  the  consolidated 
company,  as  well  as  a  lesser  debt,  it  would  seem  that  its  stockholders  should  have  a 
proportionately  increased  amount  of  the  consolidated  stock.  This  could  bo  reached 
by  an  arithmetical  calculation.  There  is  nothing  in  the  bill  as  now  drafted  which 
militates  against  consolidation.  But,  as  it  would  be  so  valuable  to  the  Government, 
we  have  suggested  a  clause  to  cover  it  in  the  list  of  amendments  appended. 

PREFERENCE  OF  PROCEEDINGS  ON  CALENDARS  OF  COURTS. 

This  would  insure  the  utmost  promptitude  in  the  disposition  of  this  matter,  so 
that  it  could  be  disposed  of  in  sixty  to  ninety  days  alter  the  appointment  of  com- 
missioners, if  we  are  to  judge  by  the  celerity  with  which  stockholders  have  paid 
similar  assessments.  An  amendment  is  inserted  in  our  bill  to  cover  this  point. 

TEMPORARY  EMPLOYMENT  OF  THE  ACT  OF  1887— NO  SYNDICATE  REQUIRED. 

The  mere  affirmance  of  the  act  of  1887  by  the  present  Congress  would  most 
likely  render  the  execution  of  its  provisions  unnecessary,  because  the  first-mortgage 
bondholders  would  perceive  that  it  was  in  the  power  of  the  commissioners  to  pro- 
tect the  Government.  Moreover,  the  Government  plan  of  reorganization  would  be 
acceptable  to  the  first-mortgage  bondholders,  as  it  offers  them  better  terms  than 
many  of  them  have  already  indicated  a  willingness  to  accept.  In  any  event,  the 
redemption  of  the  first-mortgage  debt,  accruing  in  1896,  would  be  merely  temporary 
until  this  reorganization  was  completed,  when  the  new  substituted  bonds  could  be 
sold.  The  bill  enables  the  commissioners  thus  to  protect  the  Government  reorgani- 
zation, either  through  the  act  of  1887  or  by  advances  obtained  from  stockholders 
who  had  subscribed  to  the  plan. 

THIS   PLAN  IS    BOUND    TO    PRODUCE    THE    BEST    ATTAINABLE    PRICE   FOR   THE   FIRST 
AND   SECOND  MORTGAGES. 

It  must  be  apparent  that  the  coercive  method,  adapted  in  this  bill  from  the  pre- 
vailing system  of  railroad  reorganization,  is  certain  to  produce  the  best  possible 
price  for  the  prior  mortgages.  It  is  not  to  be  supposed,  in  the  nature  of  things,  that 
the  junior  interests  in  these  properties  are  coming  forward  voluntarily  to  offer  the 
firsts  and  the  Government  the  highest  price  of  which  the  property  is  susceptible 
for  their  interests.  As  there  are  just  about  enough,  earnings  to  sustain  the  capitali- 
zation for  bringing  the  firsts  and  the  Government  "out  whole,"  it  is  not  surprising 
to  find  the  juniors  and  stocks  maneuvering  to  get  the  prior  mortgages  to  share  these 


448  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

present  earnings  with  them,  instead  of  their  awaiting  a  partial  resumption  of  the 
old  scale  of  revenues.  As  matter  of  fact  they  will  derive  considerable  advantage 
from  the  reduction  in  the  rate  of  interest  upon  the  new  issues  substituted  for  the 
present  6  per  cent.  And  with  the  income  bonds  (which  the  commissioners  would  likely 
accord  them  in  lieu  of  their  present  fixed-charge  securities,  and  in  addition  to  the  new 
superior  mortgages  which  they  would  receive  for  their  subscriptions)  they  would 
get  out  of  the  property  all  to  which  they  are  equitably  entitled.  In  any  event,  the 
Government,  through  "its  commissioners  (being  its  own  committee  of  reorganisa- 
tion), would  act  directly  upon  each  junior  bondholder  and  stockholder  endeavoring 
to  protect  the  future  of  his  investment.  No  syndicate  could  interpOM  between  the 
Government  and  the  just  payment  of  more  than  $100,000,000  into"  its  Treasury,  as 
well  as  the  protection  of  its  prior  lieuors,  the  first-mortgage  bondholders. 


AMENDMENTS  TO  BILL. 

Section  1,  second  line,  after  "President,"  insert  the  words  "not  more  than  two  of 
whom  shall  be  of  the  same  political  party,  and  none  of  whom  shall  have  been  in  any 
manner  officially  connected  with  any  of  said  companies." 

Section  2,  at  the  end  insert  the  following  words :  "  All  suits  to  enforce  liens  on  the 
bond-aided  railroads  shall,  in  furtherance  of  this  act,  have  absolute  preference  at  all 
stages  on  the  calendars,  and  on  hearings  in  the  Federal  courts,  and  the  time  for 
return  of  all  process  and  the  tiling  of  all  pleadings  shall  be  shortened,  so  that  the 
roads  may  be  sold  under  this  Government  plan  of  reorganization  not  later  than 
October  1,  1896." 

Section  3,  fourth  line,  before  the  word  "company"  insert  the  word  "consoli- 
dated." On  the  fourteenth  line  of  the  same  section,  after  the  word  "railroads," 
insert  the  words  "as  an  entirety." 

Section  4,  eighth  line,  after  the  word  "Government,"  insert  "this  company  shall 
possess  all  the  corporate  powers  heretofore  granted  by  Congress  to  the  bond-aided 
railroads,  and  also  such  powers  as  may  be  requisite  to  enable  it  to  carry  out  the  pur- 
poses of  this  act." 


PACIFIC  RAILROAD  DEBTS — PLAN  FOR  THE  PAYMENT  IN  FULL  OF  FIRST  AND  SECOND 
(GOVERNMENT)  MORTGAGES — BILL  AND  STATEMENT  PRESENTED  ON  BEHALF  OF 
FIRST-MORTGAGE  BONDHOLDERS. 

PACIFIC  RAILROAD  REORGANIZATION. 
Preserving  all  junior  interests  on  condition  of  their  redemption  of  prior  liens. 

To  the  Congress  of  the  United  States  : 

In  presenting  the  accompanying  "Bill  to  provide  for  the  collection  of  the  liabili- 
ties of  Government-aided  railroads  to  the  United  States,"  the  undersigned  respect- 
fully submit  the  following  explanation  of  its  provisions: 

The  guiding  principle  of  the  measure  is  to  provide  for  the  payment  to  the  Govern- 
ment and  its  fellow-bondholders  of  the  full  amount  of  their  claims.  This  result 
is  to  be  attained  by  requiring  the  junior  interests  in  these  properties  to  subscribe 
for  issues  of  bonds,  based  on  the  present  earnings  of  the  railroads,  thus  providing 
the  cash  funds  for  the  satisfaction  of  the  first  and  second  mortgages.  The  bill  estab- 
lishes the  usual  efficient  machinery  for  accomplishing  this  result,  such  as  is  employed 
by  private  individuals  in  like  exigencies. 

In  considering  the  practical  application  of  this  measure  it  should  be  premised 
that  the  Government  is  in  effective  control  of  the  first  as  well  as  the  second  mort- 
gages on  these  roads.  Besides  the  Government  holdings  of  $16,568,000  of  the  first- 
mortgage  bonds  in  the  sinking  funds,  Congress  has,  by  the  act  of  1887,  empowered 
the  President  to  pay  the  overdue  first  mortgage  debt  "out  of  the  Treasury."  There- 
fore, while  enacting  measures  for  the  collection  of  the  entire  debts  to  the  United 
States,  Congress  starts  with  the  benefit  of  its  previous  legislation,  protecting  the 
Government's  interest  against  the  attacks  of  foreclosing  bondholders.  The  Govern- 
ment, being  the  practical  controller  of  both  the  first  and  second  mortgages  in 
default,  dominates  all  proceedings  for  the  foreclosure  and  sale  of  the  properties,  and 
can  utilize  those  proceedings  to  obtain  full  payment  for  itself  and  its  fellow-bond- 
holders. That  is,  in  effect,  what  the  present  bill  proposes  to  accomplish. 

We  are  not  dealing  with  dilapidated  or  impoverished  estates,  but  with  2,302  miles 
of  railroad,  in  first-class  condition,  and  earning;  yet  a.bqu,t  $7,,5Q0;000  per  annum,. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  449 

This  is  the  minimum  of  earnings  for  the  past  ten  years;  yet  it  is  sufficient  to  pay 
the  interest,  at  44-  per  cent  (about  the  normal  rate  on  this  class  of  security),  on 
$166,000,000  of  mortgage  bonds.  The  first  and  second  mortgage  debts  of  the  Union. 
Kansas,  and  Central  Pacific  railroads  (less  company  sinking  funds)  aggregate  about 
$165,000,000.  Therefore,  even  under  the  present  unfavorable  conditions,  the  earnings 
can  be  capitalized  (treating  the  ro.-uls  as  an  entirety)  at  an  amount  sufficient  to  pay 
the  two  superior  iucumbrances  in  full. 

Considering  that  the  average  net  earnings  for  the  past  ten  years  have  been  about 
$10,500,000  per  annum,  it  is  apparent  that  there  is  more  than  ample  warrant  for  this 
proposed  basis  of  reorganization.  Let  us,  however,  examine  the  financial  condition 
of  each  road  separately,  to  ascertain  the  extent  of  its  ability  to  pay  the  interest 
upon  issues  of  bonds  equal  in  amount  to  its  present  first  and  second  mortgages. 

UNION   PACIFIC — SUBSIDIZED   DIVISION. 

The  first  and  Government  debts  of  this  road  are  about  $68,000,000.  The  net  earn- 
ings for  the  current  year  are  about  $3,800,000.  The  sum  required  to  pay  the  interest 
on  the  above  debt,  at  4£  per  cent,  is  $3,060,000,  beinjr  $740,000  less  than  the  current 
net  earnings  of  the  subsidized  portion  of  the  line.  The  average  annual  net  earnings 
of  these  rails  for  the  past  five  years  have  exceeded  $5,000,000.  Assuming  that  the 
Union  Pacific  main  line  were  recognized  separately  from  the  Kansas  Pacific  Division, 
under  this  general  plan,  then,  in  that  event,  the  settlement  of  United  States  mortgage 
claims  is  doubly  assured  by  the  large  net  returns  of  that  route  by  itself. 

KANSAS   PACIFIC — SUBSIDIZED   DIVISION. 

The  first  and  Government  debts  of  this  road  aggregate  about  $19,000,000.  The 
net  earnings  for  the  current  year  are  about  $1,000.000.  The  sum  required  to  pay 
the  interest  on  the  above  debts,  at  4J  per  cent,  is  $855,000,  being  $145,000  less  than 
the  present  deteriorated  earnings  of  the  aided  portion  of  this  line.  The  average 
annual  net  earnings  for  the  past  five  years  have  exceeded  $1,300,000. 

CENTRAL   PACIFIC— SUBSIDIZED   DIVISION. 

The  net  first-mortgage  and  Government  debts,  secured  on  the  bond-aided  por- 
tions of  this  line,  are  approximately  $80,000,000.  The  net  earnings  for  the  current 
year  (under  the  lease  to  the  Southern  Pacific)  are  about  $2,750,000.  The  sum 
required  to  pay  the  interest,  at  4|  per  cent,  on  the  above  debts,  is  $3.870,000.  The 
average  annual  net  earnings  for  the  past  ten  years  during  the  lease,  have  somewhat 
exceeded  $3,000,000. 

AMOUNT  OF   SUBSCRIPTION   TO   NEW  BONDS   REQUIRED   TO   SATISFY  GOVERNMENT  AND 
INDIVIDUAL   HOLDINGS   ON   MAIN   LINES. 

The  foregoing  data  indicate  that  the  first-mortgage  bondholders  (including  the 
Government  as  the  largest  holder)  and  the  United  States  as  the  second  mortgagee, 
can  be  adequately  reimbursed  by  the  operation  of  this  bill.  It  provides  that  the 
Government  commissioners,  who  are  to  manage  its  administrative  details,  shall 
notify  the  bondholders  and  stockholders  that  they  may  retain  their  interest  in  the 
properties  and  participate  in  their  future  earnings  upon  subscribing  to  issues  of 
bonds  sufficient  in  amount  to  pay  off  the  first  and  second  mortgages.  The  penalty  for 
not  uniting  in  such  subscriptions  will  consist  in  exclusion  from  any  further  interest  in 
the  property,  and  the  allotment  of  such  non  assenting  interest  toother  subscribing  par- 
ties. In  ascertaining  the  probability  of  thus  obtaining  these  payments,  the  amount 
required  may  be  practically  reduced  by  the  sum  of  the  present  first-mortgage  debt 
(less  the  Government  holdings  of  those  bonds),  inasmuch  as  the  first-mortgage 
bondholders  will,  doubtless,  exchange  their  present  holdings  about  falling  due  for 
these  fifty-year  4£  per  cent  bonds  amply  secured.  Many  of  them  have  already 
expressed  their  willingness  to  accept  a  4  per  cent  bood  with  inferior  security.  Forty- 
one  million  one  hundred  and  thirteen  thousand  dollars  of  the  new  issues  of  bonds 
may,  therefore,  be  deemed  exchangeable  for  the  present  first-mortgage  bonds.  The 
balance  of  the  new  issues,  consisting  of  the  Government's  first-mortgage  holdings 
and  its  entire  second  mortgages,  aggregating  $124,000,000,  are  under  this  plan  to 
be  placed  with  other  creditors  and  the  stockholders.  The  total  junior  lien  bonds 
and  stocks  of  the  three  roads  available  for  this  purpose  aggregate  $161,089,000. 

Let  us  examine  the  resources  of  the  Government  for  thus  placing  these  new 
issues,  through  the  action  to  be  taken  by  its  commissioners,  under  the  provisions  of 
this  bill. 


450  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


RIGHTS     OF    SUBSCRIPTION    TO    THE     NEW    ISSUES    OF    BONDS — UNION    AND     KANSAS 

PACIFIC. 

There  are  about  twenty  millions  of  bonds  having  incumbrances  on  these  roads, 
inferior  to  the  Government  liens,  and  $60,800,000  of  capital  stock  outstanding  on 
these  properties.  The  total  amount  of  first-mortgage  and  Government  debts  of  these 
roads  is  $87,000,000.  Considering  that  the  present  first-mortgage  bonds  (excluding 
the  Government  holdings  thereof,  which  are  to  be  paid  in  cash)  would  be  exchanged 
for  the  new  issues,  the  net  balance  required  to  be  taken  up  by  the  subscriptions  of 
the  junior  securities  and  stockholders  would  be  $62,000,000.  To  accomplish  this 
result,  the  holders  of  twenty  millions  of  bonds  and  of  more  than  sixty  millions  of 
stock  would  be  enlisted  as  'subscribers.  Th»  investment  of  capital  in  these  new 
issues  must  be  favorably  regarded,  considering  the  present  showing  of  $900,000 
of  surplus  revenues  of  these  roads  over  and  above  the  aggregate  amount  requisite 
to  pay  the  interest  account.  The  very  much  greater  average  annual  revenues  for  ten, 
or  live,  years  past  will  also  form  an  essential  element  in  the  estimate  of  investors. 
But  the  position  of  these  new  securities  is  favorably  affected  by  other  special 
considerations. 

The  present  stockholders  are  deeply  interested  in  their  equity  in  the  property — 
in  the  future  earnings.  While  the  investment  of  their  capital  in  a  well-secured 
interest-bearing  bond  is  of  itself  desirable,  it  is  doubly  so  when  that  investment 
leaves  them  in  possession  of  stockholdings  showing  a  dividend  even  under  the  j»res- 
ent  minimum  conditions,  and  with  a  practical  warrant  for  increased  returns  to  the 
stockholders  under  fairly  restored  conditions. 

On  the  other  hand,  if  they  fail  to  furnish  the  money  wherewith  the  first  and  Govern- 
ment mortgages  may  be  paid  off,  their  stock  will  be  forfeited,  and  will  be  allotted  to 
other  parties  in  interest  who  are  willing  to  take  the  new  bonds,  and  thus  satisfy  the 
superior  claims  on  the  railroads.  There  is  no  ground  for  apprehension  that  they  will 
suffer  any  such  result  to  transpire,  as  the  success  of  similar  plans  during  the  past 
few  months  amply  evidences. 

Without  entering  upon  details,  the  following  illustrations  may  suffice:  The  New 
York  and  New  England  Railroad  stockholders  paid  $20  per  share,  cash  assessment, 
without  receiving  any  new  security  of  the  reorganized  company  to  represent  their 
new  capital,  but  so  subscribed  merely  to  save  their  nondividend-paying  stock  from 
forfeiture.  The  stockholders  of  the  Minneapolis  and  St.  Louis  Railroad  Company 
paid  $25  per  share,  in  cash,  to  take  up  foreclosing  bonds,  which  were  thereupon 
transferred  to  the  subscribing  stockholders,  as  proposed  substantially  by  this  plan. 
The  stockholders  of  the  Erie  Railroad  have  almost  unanimously  paid  $12  per  share, 
in  cash,  on  nearly  $78,000,000  of  stock,  receiving  in  return  on\y  stock  in  a  new  com- 
pany. In  the  above  instances  and  many  others  apparently  hopeless  stockholdings 
have  afforded  the  resources  for  redeeming  the  properties  from  insolvency. 

But  in  the  case  of  the  Pacific  railroads  the  inherent  merits  of  the  properties  invest  the 
proposed  new  issues  of  bonds,  as  well  as  the  stock  interest,  with  special  considera- 
tions favorable  to  the  resiimption  of  much  larger  earnings.  During  the  receiver- 
ships large  sums  have  been  spent  on  betterments,  and  the  roads  are  now  in  good 
physical  condition.  The  recent  decision  of  the  Supreme  Court  of  the  United  States 
relieves  them  of  the  iuciibus  of  the  Western  Union  and  enables  them  to  utilize  their 
fine  telegraph  system.  It  should  also  be  noted  in  this  connection  that,  pursuant  to 
the  suggestion  of  Government  officials,  the  bill  makes  provision  for  the  reorganized 
companies  to  secure  an  independent  connection  with  the  Pacific  Coast,  which  is 
expected  to  increase  their  through  traffic.  The  contemplation  of  these  elements  of 
value  has  already  induced  a  large  number  of  Union  Pacific  stockholders  to  furnish 
proof  of  their  confidence  in  the  future  of  the  property  by  subscribing  $15  per  share, 
under  a  plan  heretofore  presented  to  them,  and  agreeing  to  accept  in  return  only 
preferred  stock  at  par  out  of  an  issue  of  $75,000,000,  and  subject  to  a  mortgage  of 
$100,000,000.  In  fact,  the  memory  of  large  dividends  received  upon  this  stock  is  still 
too  vivid  in  the  minds  of  the  holders  for  them  to  permit  any  lapse  of  their  interests. 
The  much  larger  part  of  the  total  stocks  of  the  Union  and  Central  Pacific  roads  is 
held  in  England  and  other  parts  of  Europe,  therefore  the  demand  for  money  involved 
in  these  subscriptions  will  not  measurably  affect  the  domestic  money  markets,  but 
will,  on  the  contrary,  benefit  the  foreign  exchange  conditions  with  Eiirope.  More- 
over, nothing  unreasonable  is  required  of  any  interest,  but  the  requirements  are  pro- 
portioned to  the  grade  of  security  belonging  to  each  claimant  and  merely  furnish  the 
facilities  through  which  the  junior  holders  in  the  roads  may  preserve  their  aliquot 
interests  through  the  usual  equitable  course  of  redemption.  Indeed,  these  rights 
of  subscription  to  such  valuable  securities  will  probably  command  a  premium,  as 
the  stock  itself  has  recently  doubled  in  price.  Therefore,  no  doubt  need  be  enter- 
tained that  under  the  skillful  management  of  Government  commissioners,  wielding 
legitimate  powers,  the  negotiation  of  the  new  issues  of  bonds  will  be  financially 
assured  and  the  Government  fully  repaid  in  cash,  with  the  partial  exception  now  to 
be  noticed. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS.  451 


CENTRAL  PACIFIC. 

All  that  has  been  heretofore  said  applies  to  the  Central  Pacific,  with  this  modifica- 
tion: The  current  net  earnings  (under  the  lease),  $2,750,000,  are  not  sufficient  to  pay 
the  interest,  at  4-|  per  cent,  on  more  than  about  fifty  millions  of  bonds,  after  deduct- 
ing the  ten  millions  set  apart  for  acquiring  the  Pacific  Coast  connection.  Hence 
there  would  remain  about  thirty  millions  of  debt  from  the  Central  Pacific  to  the 
Government  still  unsatisfied.  This  would,  however,  be  represented  by  that  amount 
of  the  new  issue  of  bonds  in  the  hands  of  the  United  States,  to  bear  interest  when 
justified  by  the  earnings  of  the  road  (with  provision  for  capitalizing  the  unpaid 
interest  account  down  to  the  time  of  the  commencement  of  cash-coupon  payments). 
Provisions  for  tbis  purpose  to  be  inserted  in  the  mortgages,  to  be  drafted  under  the 
direction  of  the  commissioners.  But  if  the  anticipation  of  increased  revenues  by 
reason  of  independence  from  the  Southern  Pacific  be  justified,  there  would  not  be  a 
long  interval  before  the  bonds  thus  retained  became  interest  bearing.  By  the  above 
arrangements  the  reorganization  would  provide  the  resources  upon  the  security  of 
the  road  for  assuring  its  independent  operation,  and  meanwhile  the  interest  of  the 
United  States  in  the  property  would  be  represented  by  $22,000,000  in  cash,  received 
on  subscriptions  to  the  new  bonds,  and  $30,000,000  in  the  new  bonds,  secured  as  above 
set  forth. 

RECAPITULATION. 

The  financial  result  would  be  the  payment,  in  cash,  to  the  Government  of 
$92,568,000,  as  follows: 

First-mortgage  bonds,  held  in  sinking  funds  (individual  first-mortgage 

holders  exchanging  for  now  four-and-a-halfs) $16,  568, 000 

Union  Pacific  second  mortgage,  in  full , 41,  000,  000 

Kansas  Pacific  second  mortgage,  in  full 13,  000,  000 

Central  Pacific  second  mortgage,  partial 22, 000,  000 

Mortgage  bonds,  representing  balance  of  Government  interest  in  Central 

Pacific 30,  000,  000 

We  have  endeavored  by  the  foregoing  statement  to  outline  our  estimate  of  the 
practical  workings  of  this  bill.  But  the  measure  proceeds  on  the  principle  that  it 
is  to  the  interest  of  all  the  first  and  second  mortgagees  to  leave  the  administrative 
details  of  the  reorganization  to  the  Government  commissioners,  binding  them,  how- 
ever, by  the  essential  limitation  that  those  mortgages  shall  be  paid  in  full,  as  far  as 
the  present  resources  of  the  properties  admit,  and  for  the  balance  that  they  shall 
have  all  possible  security.  The  adoption  of  this  measure  would  secure  those  results 
in  a  businesslike  way  and  with  such  safeguards  as  would  be  beyond  the  cavil  of 
criticism. 

New  York,  February  3, 1896. 

H.  LIVINGSTON  ROGERS, 

Agent  for  Bondholders. 

L.  J.  MORRISON,  Of  Counsel. 


A  BILL  to  provide  for  the  collection  of  the  liabilities  of  Government-aided  railroads  to  the  United 

States. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  in  Congress  assembled: 

SECTION  1.  That  three  commissioners  shall  be  appointed  by  the  President,  by  and 
with  the  advice  and  consent  of  the  Senate,  whose  duty  it  shall  be  to  represent 
and  manage  the  interests  of  the  United  States  in  bond-aided  railroads  for  the  col- 
lection of  all  sums  due  and  to  become  due  therefrom  to  the  Government,  subject  to 
the  provisions  and  limitations  of  this  act. 

SEC.  2.  That  the  Government  commissioners  shall  proceed  to  enforce  all  the  rights, 
liens,  and  claims  of  the  United  States,  upon  the  said  railroads,  the  sinking  funds,  and 
all  other  property  in  or  to  which  the  United  States  has  any  claim  or  equity,  the 
intent  of  the  said  enforcement  being  to  obtain  the  payment  in  full  and  in  cash  to 
the  Government  of  all  the  aforesaid  liabilities ;  and  the  said  commissioners  shall  not 
make  any  arrangement,  or  give  quittances,  except  upon  the  basis  of  the  receipt  of 
the  entire  amounts,  principal  and  interest,  payable  to  the  United  States  from  the 
said  railroads,  respectively,  as  hereinafter  set  forth. 

SEC.  3.  That  in  furtherance  of  the  above  object  the  Government  commissioners 
shall,  upon  taking  office,  issue  notices  to  the  creditors  and  stockholders  of  the  rail- 
road companies,  severally,  and  with  such  assessments  and  penalties  as  they  may 
prescribe,  that  the  United  States  will  proceed  to  obtain  decrees  of  foreclosure  and 


452  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 

sale  of  the  said  railroads,  and  that  the  commissioners  will  thereat  purchase  the  said 
railroads  in  trust  for  a  company  or  companies,  which  shall  consist  of  all  the  present 
creditors  and  stockholders  who  subscribe  to  the  Government  plan  of  reorganization, 
which  plan  shall  be  constituted  as  follows: 

It  shall  provide  for  the  issue  of  new  mortgage  bonds,  bearing  a  lower  rate  of 
interest  than  the  present  prior  liens,  and  to  such  amounts  and  in  such  series  as  are 
warranted  by  the  net  earnings  of  the  said  railroads.-  The  said  new  issues  of  obliga- 
tions shall  include  at  least  the  amounts  of  the  present  first-mortgage  bonds  and  the 
sums  secured  by  the  Government  liens. 

The  holders  of  all  obligations  of  the  said  companies  and  the  stockholders  thereof 
shall  have  the  right,  upon  subscribing  to  the  said  new  issues  of  mortgage  bonds,  to 
receive  allotments  of  the  same,  and  the  present  stockholders  shall,  in  addition,  have 
the  right  to  retain  their  proportionate  stock  interests  in  the  railroads  as  reorganized. 
In  case  of  the  failure  of  some  of  the  said  creditors  or  stockholders  to  subscribe  for 
the  new  securities,  as  aforesaid,  the  commissioners  shall  make  arrangements  with 
other  creditors  or  stockholders  who  may  be  willing  to  subscribe,  and  they  shall  be 
allotted  the  bonds  and  stocks  of  the  reorganized  companies  proportionately  to  their 
additional  subscriptions. 

The  amounts  received  by  the  commissioners  on  account  of  subscriptions  to  the 
new  securities  shall  be  applied  to  the  payment  of  the  Government  and  other  hold- 
ings of  first-mortgage  bonds,  and  likewise  to  the  payment  of  the  Government  liens. 
First-mortgage  bondholders  other  than  the  Government  shall  have  the  right  to 
subscribe  for  and  receive  new  issues  of  bonds  and  to  pay  for  the  same  with  their 
present  first  mortgage  holdings,  which  shall  thereupon  be  canceled. 

The  commissioners  shall  turn  into  the  Treasury  all  net  sums  received  by  them  on 
subscriptions  to  the  new  issues  of  bonds,  and  upon  full  payment  of  all  the  amounts 
due  to  the  United  States  from  each  railroad  company  severally,  or  on  account  of  each 
Government  lien  severally,  the  commissioners  shall,  on  behalf  of  the  United  States, 
deliver  a  full  release  of  such  Government  lien.  In  case  the  subscriptions  to  the  said 
bonds  do  not  equal  the  total  amount  secured  by  the  liens  severally,  the  commis- 
sioners shall  deliver  releases  pro  tauto,  and  the  Government  liens  for  the  balances 
shall  thereafter  be  represented  by  the  amount  of  bonds  remaining  in  the  hands  of 
the  commissioners  until  the  same  are  sold  at  par. 

SEC.  4.  That  deposits  of  the  obligations  and  stocks  of  the  said  companies  shall  be 
received  by  the  commissioners  pursuant  to  the  above-described  notices.  The  com- 
missioners shall  use  deposited  bonds  that  are  available  for  the  purchases  of  the  said 
railroads  at  the  foreclosure  sales.  The  commissioners  shall  thereupon  transfer  the 
title  or  titles  of  the  railroads  so  purchased  to  a  company,  or  to  companies,  composed 
of  the  subscribers  to  the  new  securities,  to  be  issued  for  the  payment  of  the  Govern- 
ment. And  for  the  above  purposes  the  commissioners  shall  have  the  power  to  employ 
counsel,  clerks,  and  all  proper  agents,  whose  compensation,  as  well  as  that  of  the 
commissioners,  shall  be  paid  from  assessments  on  the  bondholders  and  stockholders, 
or  out  of  the  proceeds  of  sale,  and  according  to  the  usual  manner  in  cases  of  the  reor- 
ganization of  railroads. 

SEC.  5.  That  for  the  purpose  of  effecting  the  full  payment  of  the  Government  as 
aforesaid,  the  commissioners  shall  request  the  President  to  enforce  the  provisions  of 
the  act  of  1887,  in  reference  to  the  payment  of  the  first-mortgage  bonds  of  the  said 
railroads,  or  may  make  arrangements  with  any  subscribers  toward  the  payment 
of  the  Government  liens  as  aforesaid,  for  advances  of  the  amounts  necessary  to  pro- 
tect the  Government  liens  during  the  progress  of  the  reorganization. 

SEC.  6.  That  in  determining  the  amounts  of  the  new  issues  of  mortgage  bonds,  the 
commissioners  shall  provide  a  sufficient  amount  thereof  to  complete  the  main  line  of 
Pacific  Railroad  from  Omaha  to  the  Pacific  Ocean.  And  the  said  bonds  so  executed 
by  the  purchasing  company  or  companies  shall  be  used  by  them  for  the  construc- 
tion of  any  part  of  the  said  continuous  line  or  for  the  purchase  of  any  existing  line 
adapted  to  said  connection. 

SEC.  7.  That  upon  the  payment  in  full  to  the  Government  as  aforesaid  of  any  of 
the  said  liens  belonging  to  the  United  States,  all  acts  and  parts  of  acts  in  reference 
to  the  earnings  of  the  said  railroads  severally,  or  establishing  special  relations 
between  them  and  the  Government,  shall  thereupon  cease  and  determine. 

Adjourned. 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


453 


The  following  statements  were  subsequently  received  from  Mr.  Mink: 

A. 

THE  UNION  PACIFIC  SYSTEM. 

Statement  of  the  financial  operations  of  S.  H.  H.  Clark.  Oliver  W.  Mink,  E.  Ellery  Anderson, 
John  W.  Doane,  and  Frederic  E.  Coudert,  receivers  of  the  properties  owned  ~by  the  Union 
Pacific  Eailway  Company,  during  the  period  from  October  13,  1893,  to  December  31,  1895. 


Name  of  company. 

Gross  earn- 
ings. 

Income 
from 
invest- 
ments. 

Other 
receipts. 

Total 
receipts. 

Operating 
expenses. 

Taxes. 

Union  Pacific  Railway  : 
Ames  receivership. 
Consolidated  mort- 
gage receiver- 
ship   
Dexter-  Ames    re- 
ceivership   
Denver   Pacific 
mortgage  receiv- 

$17,  273,  022.  22 

4,  235,  206.  93 
10,  004,  993.  41 

830,  924.  59 
488,  454.  94 

$740,  944.  52 

$254,  482.  03 

$18,  268,  448.  77 

4,  235,  206.  93 
10,  004,  993.  41 

830,  924.  59 
488,  454.  94 

$11,  700,  590.  51 

2,  817,  514.  91 
5,  840,  649.  21 

549,  770.  20 
270,  708.  32 

$628,  950.  93 

304,  242.  93 
345,  003.  17 

27,  557.  49 
32,  187.  10 

Omaha     Bridge 
mortgage   divi- 

Total        

32,  832,  602.  09 

740,  944.  52 

254,  482.  03 

33,  828,  028.  64 

21,179,233.15 

1,  337,  941.  62 

Name  of  company. 

Interest  paid 
on  coupon 
orders. 

United  States 
earnings 
withheld. 

Other  expend- 
itures. 

Total  expend- 
itures. 

Surplus. 

Union  Pacific  Railway  : 
Ames  receivership  . 
Consolidated  mort- 
gage receiver- 
ship 

$3,  505,  365.  00 

$1,  523,  868.  30 

199,  778.  81 
1,038,881.89 

6,  340.  24 
3,  425.  62 

$206,  642.  66 

356,  753.  83 
736,  900.  32 

52,  635.  74 
160,  132.  58 

$17,  565,  417.  40 

3,  678,  290.  48 
7,  965,  334.  59 

636,  303.  67 
466,  453.  62 

$703,  031.  37 

556,  916.  45 
2,  039,  658.  82 

194,  620.  92 
22,  001.  32 

Dexter-  Ames    r  e  - 

3,  900.  00 

Denver  Pacific 
mortgage  receiv- 

Omaha  Bridge 
mortgage  d  i  v  i  - 
sion          

Total 

3,  509,  265.  00 

2,  772,  294.  86 

1,  513,  065.  13 

30,  311,  799.  76 

3,  516,  228.  88 

ALEX.  MILLAR,  Assistant  Comptroller. 
OFFICE  OF  THB  RECEIVERS,  Boston,  Mass.,  March  24,  1896. 

AMES   RECEIVERSHIP. 

Memorandum  showing  detail  of  item  u other  expenditures"  October  13,  1893,  to  December 
31,  1895,  inclusive,  Ames  receivership,  as  shown  in  statement  of  financial  operations, 
dated  Boston,  March  13,  1896. 

Commission  and  expense  of  paving  coupons  abroad $3, 231. 08 

Discount  and  interest ." 4,  079.  97 

Harris  accident  judgment  (court  order,  Ames,  No.  203) 7,982.88 

McDonald  coal  judgment  (court  order,  Ames,  No.  97) 10,184.66 

Union  Depot  Company,  Spokane  Falls  bonds  purchased 24,  043. 45 

Leavenworth,  Topeka  and  Southwestern  Railway  deficit,  October  13, 

1893,  to  January  6,  1894,  inclusive  (court  order,  Ames,  No.  24) 12,  663.  28 

Deficit,  cripple  lines : 

October  13,  1893,  to  July  31,  1894,  inclusive  (court  order, 
Ames,  No.  138— 

Union  Pacific,  Brighton  and  Boulder  Branch $5,686.79 

Junction  City  and  Fort  Kearney  Railway 42,  055. 42 

Omaha  and  Republican  Valley  Railway 75, 116.  92 

Salina  and  Southwestern  Railway 11,  601.  03 

October  13,  1893,  to  December  31,  1894,  inclusive  (court 
order,  Ames,  No.  158),  Kansas  City  and  Omaha  Railroad.     9, 994. 18 

144,457.34 

Total ! 206^642.66 

ALEX.  MILLAR,  Assistant  Comptroller. 
OFFICE  OF  THE  RECEIVERS,  Boston,  March  24, 1896. 


454  GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


CONSOLIDATED  MORTGAGE  RECEIVERSHIP. 

Memorandum  showing  detail  of  item  "other  expenditures,"  July  17,  1894,  to  December  31, 
1895,  inclusive,  consolidated  mortgage  receivership,  as  shown  in  statement  of  financial 
operations,  dated  Boston,  March  13,  1896. 

Union  Pacific  Railway   equipment  trust  obligations  paid  pursuant  to 

Kansas  Pacific  (court  order  No.  B-25) $263, 178.  69 

Denver  extension  land  expenses,  October  13,  1893,  to  Feb- 
ruary 28, 1895,  inclusive $206,975.21 

Less  repayments 113,400.07 

93, 575. 14 

Total 356,753.83 

ALEX.  MILLAR,  Assistant  Comptroller. 
OFFICE  OF  THE  RECEIVERS, 

Boston,  March  24, 1896. 

DEXTER-AMES   RECEIVERSHIP. 

Memorandum  showing  detail  of  item  "other  expenditures,"  January  22  to  December  31, 
1895,  inclusive,  Dexter-Ames  receivership,  as  shown  in  statement  of  financial  operations 
dated  Boston,  March  13,  1896. 

Union  Pacific  Railway  equipment  trust  obligations  paid  pursuant  to 
Dexter- Ames  (court  order  No.  19) $736,  900.  32 

ALEX.  MILLAR,  Assistant  Comptroller. 
OFFICE  OF  THE  RECEIVERS, 

Boston,  March  £4,  1896. 

DENVER  PACIFIC   MORTGAGE   RECEIVERSHIP.    . 

Memorandum  showing  detail  of  item  "other  expenditures,'"  November  19, 1894,  to  December 
31,  1895,  inclusive,  Denver  Pacific  mortgage  receivership,  as  shoivn  in  statement  of  finan- 
cial operations  dated  Boston,  March  13,  1896. 

Union  Pacific  Railway  equipment  trust  obligations  paid  pursuant  to 
Denver  Pacific  (court  order  No.  A-15) $52,  635.  74 

ALEX.  MILLAR,  Assistant  Comptroller. 
OFFICE  OF  THE  RECEIVERS, 

Boston,  March  24,  1896. 

OMAHA  BRIDGE   MORTGAGE   DIVISION. 

Memorandum  showing  detail  of  item  "other  expenditures"  August  1, 1894,  to  December  31, 
1895,  inclusive,  Omaha  Bridge  mortgage  division,  as  shoivn  in  statement  of  financial 
operations  dated  Boston,  March  13,  1896. 

Not  earnings  Omaha  Bridge  mortgage  division  from  August  1,  1894,  to 
October  31,  1895,  inclusive,  paid  to  J.  Pierpont  Morgan  and  Edwin  F. 
Atkins,  trustees,  pursuant  to  Ames  (court  order  No.  108) $160, 132.  58 

ALEX.  MILLAR,  Assistant  Comptroller. 
OFFICE  OF  THE  RECEIVERS, 

Boston,  March  24,  1896. 


B. 

Statement  of  the  Union  Pacific  Railway  Company's  debt  to  the  United  States,  the  estimated 
value  of  the  United  Mates  sinking  fund  January  1, 1897,  and  the  amount  required  to  meet 
the  interest  on  the  debt  January  1, 1897. 

Principal  of  debt  to  the  United  States :  * 

Union  Division  bonds -, $27,236,512.00 

Kansas  Division  bonds , 6,303,000.00 


Total  debt $33,539,512.00 


GOVERNMENT   DEBT    OF    THE    PACIFIC    RAILROADS. 


455 


Value  of  the  company's  sinking  fund  January  1, 1896,  as  follows,  viz: 

Union  Pacific  first- mortgage  bonds  at  par $6,367,000.00 

Sentral  Pacific  first-mortgage  bonds  at  par 3,  230,  000.  00 

ioux  City  and  Pacific  first-mortgage  bonds  at  par 716,500.00 

Kansas  Pacific  Eastern  Division  first-mortgage  bonds  at  par 553,000.00 

Kansas  Pacific  Middle  Division  first  mortgage  bonds  at  par 925, 000.  00 

"Western  Pacific  first-mortgage  bonds  at  par 350,  000. 00 

United  States  5  per  cent  bonds  due  1904  at  112J 1,030,218.75 

United  States  currency  sixes,  $74,000,  at 77,790.00 

Atchison  and  Pikes  Peak  first-mortgage  bonds  at  50  per  cent 512, 500. 00 


Total  value  of  sinking-fund  investnents  January  1, 1896 $13,  762,  008. 75 

Cash  in  sinking  fund  January  1,  1896 1,191,179.03 

Probable  increase  in  sinking  fund  from  interest  and  transportation  dur- 
ing the  year  1896,  viz : 

From  interest  collections $690,000.00 

From  transportation  accounts 575,000.00 

1, 265,  000. 00 


Total  estimated  value  of  the  sinking  fund  January  1, 1897 16, 218, 187. 78 

Accumulated  interest  January  1,  1897,  including  interest  at  6  per  cent 
to  that  date  on  all  overdue  bonds : 

Union  Division  interest $47,019,425.13 

Kansas  Division  interest 11,234,763.09 


Total  accumulated  interest  to  January  1,  1897 58,254,188.22 

Interest  repaid  to  January  1,  1896  (excluding  sinking  fund) : 

Union  Division $14,814,908.51 

Kansas  Division 5,250,575.54 


Total  repayments  to  January  1, 1896 20, 065,  484. 05 

Probable  repayments  on  account  of  interest  during  the  year  1896: 

Union  Division  repayments 575,  000. 00 

Kansas  Division  repayments 65,  000.  00 

20,  705,  484.  05 

Balance  of  interest  account  January  1,189.7 37,548,704.17 

Interest  to  accrue  on  debt  maturing  subsequent  to  January  1, 1897,  from 
that  date  to  respective  dates  of  maturity,  viz: 

Interest  January.  1. 1897,  to  January  1, 1898.  at  6  per  cent  on  $17, 342, 512.     $1, 040,550. 72 
Interest  January  1, 1897,  to  January  1, 1899,  at  6  per  cent  on  $3, 157, 000.          378.840.00 


Total 


1, 419,  390.  72 


Present  value  on  January  1,  1897,  of  last-named  sums,  reckoning  interest 

at  2  per  cent 1,020,147.76 

and - 364,269.23 

Respectively,  amounting  to 1,  384, 416. 99 

Amount  necessary  to  meet  the  payment  of  the  interest  on  the  debt  January  1,  1897, 

exclusive  of  the  sinking  fund 38, 933, 121. 16 

NOTE— The  above  statement  does  not  include  $556.626.05  due  from  the  United  States  standing  on  the 
receivers'  Union  Pacific  system  books  at  Omaha  on  December  31,  1895. 

ALEX.  MILLAE,  Assistant  Comptroller. 
OFFICE  OF  ICHE  RECEIVERS,  Boston,  March  24,  1S96. 


0. 


RECEIVERS  UNION  PACIFIC  RAILWAY  COMPANY. 

Statement  showing  the  earnings,  expenses,  taxes,  and  net  earnings  of  the  aided  and  non- 
aided  portions  of  the  Kansas  Division  during  the  period  from  October  13,  1893,  to 
December  31,  1895,  inclusive. 


Kansas  Division. 

1895. 

•   1894. 

October  13  to  December 
31,  1893. 

Aided. 

Nonaided. 

Aided. 

Nonaided. 

Aided. 

Nonaided. 

$2,  000,  114.  24 

$744.  421.  97 

$2,  074,  716.  87 

$639,469.04   $507,057.40 

$165,  119.  48 

1,  255,  951.  26 
119,  725.  14 

608,  253.  86  !  1,  368,  168.  26 
50,479.«4         116,414.84 

536,  980.  16 
10,  866.  09 

286,  636.  26       106,  105.  53 
19:  925.  99  1        9,  863.  47 

Taxes  

Expenses  and  taxes  . 
Net  earnings 

1,  375,  676.  40 

658,733.50  1  1,484,583.10 

547,  846.  25 

306,  562.  25 

115,  969.  00 

624,  437.  84 

85,  688.  47 

590,  133.  77 

91,  622.  79 

200,  495.  15 

49,  150.  48 

OFFICE  OF  THE  RECEIVERS,  Boston,  March  16. 


ALEX.  MILLAR,  Assistant  Comptroller. 


456 


GOVERNMENT    DEBT    OF    THE    PACIFIC    RAILROADS. 


D. 
THE  UNION  PACIFIC  RAILWAY  COMPANY. 

Earnings  and  expenses  ~by  months  for  the  years  1890  to  1S95,  inclusive. 
EARNINGS. 


Month. 

1895. 

1894. 

1893. 

1892. 

1891. 

1890. 

$970  520  07 

$1  039  115.99 

$1,404  791.44 

$1,  427,  180.  01 

$1,288  365.89 

$1  193  633  82 

February  ....... 

940,  343.  64 

,  006,  963.  49 

,  260,  776.  43 

1,  299,  071.  47 

1,  200,  352.  87 

1,264,983.05 

^[arch       

1,  075,  573.  36 

,  078,  896.  39 

,  42<i,  937.  81 

1,  463,  973.  44 

1,499,228.61 

1,  679,  273.  88 

April              

1  083,343.78 

,104,231  91 

,  372,  203.  89 

1,  468,  447.  13 

1,  515,  743.  55 

1,  710.  067.  54 

May 

1  156,  180.  20 

,  201,  079.  60 

,  510,  993.  18 

1,  506,  147.  92 

1,  520,  078.  82 

1,  958,  716.  27 

1  188  052  02 

,  202,  995.  23 

,  530,  287.  16 

1,  744,  513.  06 

1,613,290.54 

1,  789,  436.  30 

July     

1,  192,  507.  91 

,  094,  369.  98 

,338.  113.49 

1,  689,  878.  10 

1.612,702.21 

1,  764,  886.  84 

1,  209,  586.  14 

,  442.  809.  64 

,  32  1.  973.  21 

1,  8H5.  449.  26 

1,  735,  523.  28 

1,  915,  717.  58 

1,  368,  532.  65 

1,  497,  066.  39 

1,  607,  010.  98 

2,191,998.72 

2,  947,  249.  55 

1,  905,  782.  90 

October 

1  646,406.15 

1,  706,  522.  50 

1,  756,  470.  08 

2.  072,  940.  59 

2,  148,  357.  06 

2,  032,  406.  94 

1  362  813.84 

1,333,110.45 

1,  544.  901.  64 

1,  940,  965.  14 

1,  963,  289.  32 

1,  910,  294.  95 

December  

1,  142,  431.  48 

1,  110,  645.  17 

1,  299,  332.  80 

1,  670,  836.  82 

1,  643,  556.  78 

1,  313,  008.  29 

Total  

14,  336,  291.  24 

14,  817,  806.  74 

17,  376,  792.  11 

20,  361,  401.  66 

19,  687,  738.  48 

20,  438,  208.  36 

OPERATING  EXPENSES  (INCLUDING  TAXES). 


$867,  924.  29 
675,  113.  49 
696,  624.  90 
695,  367.  70 
725,  445.  94 
770,  742.  38 
781,  043.  14 
739,  067.  44 
783,  072.  98 
861,  367.  82 
801,  618.  37 
1,  036,  745.  55 

$738,  487.  09 
733,  497.  31 
854,  764.  53 
795,  144.  77 
968,  201.  52 
903.  946.  13 
710,  086.  66 
871,  944.  99 
886,  248.  16 
1,104,379.51 
1,  120,  281.  32 
815,  747.  50 

$888,  869.  54 
820,  330.  49 
974,  578.  47 
904,  059.  13 
989,  488.  62 
932,  052.  22 
854,  825.  21 
814,  776.  21 
852.  515.  41 
1,  044,  062.  41 
1,  044,  508.  64 
1,046,453.95 

$904,  883.  65 
849,  628.  48 
880,  122.  79 
941,  016.  14 
958,  428.  58 
940,  235.  87 
884,  150.  57 
1,  040,  688.  93 
1,  082,  900.  72 
1,  126,  146.  91 
1,  076,  893.  53 
1,  126,  037.  27 

$871.  452.  11 
851,  306.  38 
923,  883.  19 
1,  017,  862.  40 
985,  066.  27 
1,  007,  819.  45 
1,  035,  313.  05 
1,  015,  004.  84 
959,  511.  55 
1,129,310.43 
1,  049,  292.  52 
995,  464.  59 

$929,  175.  28 
913,  006.  55 
1,  063.  116.  14 
1,  169,  086.  74 
1,  185,  583.  09 
1,049.  148.  46 
913,617.25 
1,  029,  674.  87 
1,  044,  854.  52 
1,  341.  G91.  52 
1,  313,  145.  81 
1,211,349.07 

February  

April 

Mav 

julv            

October 

November  
December  

Total  

9,  434,  134.  00 

10,  502,  729.  49 

11,  166,  520.  30 

11,  811,  133.  44 

11,  841,  286.  78 

13,  163,  449.  30 

SURPLUS  EARNINGS  (TAXES  DEDUCTED). 


$102,  595.  78 

$300,  628.  90 

$515,  921.  90 

$522,  296.  36 

$416,913.78 

$264,  458.  54 

265,  230.  15 

273,  466.  18 

440,  445.  94 

449,  442.  99 

349,  046.  49 

351,  976.  50 

378,  948.  46 

224,  131.  86 

452,  359.  34 

583,  850.  65 

575,  345.  42 

616,  157.  74 

April 

387,  976.  08 

309,  087.  14 

468,  144.  76 

527,  430.  99 

497,881.15 

540,  980.  80 

Mav 

430  734.  26 

232,  878.  08 

521,  504.  56 

547,  719.  34 

535,012.55 

773,  133.  18 

417  309  64 

299,  049.  10 

598,  234.  94 

804,  2  <  7.  19 

605,471.09 

740,  287.  84 

July             

411,  464.  77 

384.  283.  32 

483,  288.  28 

805,  727.  53 

577,  389.  16 

851,  269.  59 

470,  518.  70 

570,  864.  65 

510,  197.  00 

844.  760.  33 

720.518.44 

886.  042.  71 

September  
October  
November  

585,  459.  67 
785,  038.  33 
561,  195.  47 
105  685.93 

610,  818.  23 
602,  142.  99 
212,  829.  13 
294,  897.  67 

754,  495.  57 
712,  407.  67 
500,  393.  00 
252,  878.  85 

1,  109,  098.  00 
946,  793.  68 
864,  071.  61 
544,  799.  55 

987,  738.  00 
1,  019,  046.  63 
913,  996.  80 
648,  092.  19 

860,  928.  38 
690,  715.  42 
597,  149.  14 
101,  659.  22 

Total  

4,  902,  157.  24 

4,  315,  077.  25 

6,  210,  271.  81 

8,  550,  268.  22 

7,  846,  451.  70 

7,  274,  759.  06 

BOSTON,  March  24,  1886. 


ALEX.  MILLAR,  Assistant  Comptroller. 


GOVERNMENT   DEBT    OF    PACIFIC    RAILROADS.  457 

Letter  received  from  the  Secretary  of  the  Treasury  by  the  chairman  of  Pacific  Railroad 
Committee  regarding  L.  C.  BlaisdeWs  testimony,  to  fee  read  in  connection  with  that 
testimony.  (See pp.  407  to  441,  inclusive.) 

TREASURY  DEPARTMENT,  OFFICE  OF  THE  SECRETARY, 

Washington,  D.  C.  April  8,  1896. 

SIR  :  In  reply  to  your  inquiry  of  the  31st  ultimo  I  have  to  inform  you  that  there  is 
no  evidence  on  file  in  this  Department  as  to  the  ownership  of  the  first-mortgage 
bonds  of  the  Union  Pacific  and  Central  Pacific  Railroad  companies,  nor  has  there 
ever  been  an  agreement  made  by  Secretary  Folger  with  the  owners  of  said  bonds 
regarding  their  investment  in  the  sinking  fund  of  the  Union  and  Central  Pacific 
Railroad  companies. 

Respectfully,  yours, 

C.  S.  HAMLIN,  Acting  Secretary. 
Hon.  JNO.  H.  GEAR, 

United  States  Senate 


INDEX  TO  PACIFIC  RAILROAD  HEARINGS. 


UNION  PACIFIC. 

Page. 

Statement  of  Winslow  S.  Pierce,  counsel  for  the  reorganization  committee.. .  1,  22,  61 

Statement  of  Mr.  E.  Ellery  Anderson,  Government  director  and  receiver 35 

Statement  of  Mr.  John  Rooney,  counsel  for  first-mortgage  bondholders 252,  442 

Statement  of  Oliver  W.  Mink,  receiver 360 

Statement  of  S.  H.  H.  Clark,  receiver 400 

CENTRAL  PACIFIC. 

Statement  of  Mr.  Tweed,  counsel  for  the  Central  Pacific  Railroad  Company. ..  9 

Statement  of  Mr.  Collis  P.  Huntiugton,  president  of  the  Southern  Pacific 18, 

55,  83, 121, 157,  208,  224,  256,  303 
Statement  of  Mr.  Francis  W.  Thurher,  of  the  National  Board  of  Trade 105 

SIOUX   CITY  AND   PACIFIC. 

Statement  of  Mr.  David  T.  Littler,  counsel  for  the  Chicago  and  Northwestern 

Railway  Company 19, 55,  81 

Statement  of  Mr.  Coombs,  counsel  for  the  Credits  Commutation  Company 68 

ALL   THE   PACIFIC   RAILROADS. 

Statement  of  Leonard  C.  Blaisdell,  representing  all  first-mortgage  bonds 407,  412 

FIGURES,  TABLES,  AND   EXHIBITS. 

Earnings  of  Central  Pacific  from  1890  to  1895 13 

Central  Pacific  properties  and  liens 17 

Assets  and  liabilities  of  the  Sioux  City  and  Pacific  Railroad  Company 56 

Project  of  bill  of  reorganization  committee 65 

Contract  of  October  1,  1889,  between  the  Transcontinental  Association  and 

the  Pacific  Mail  Steamship  Company 188 

Kentucky  charter  of  the  Southern  Pacific  Company 301 

Increase  in  real  and  personal  property  in  specified  States  and  Territories, 

1870  to  1890 342 

Tonnage  of  fruit  and  wines  from  California  to  the  East 358 

Comparative  railroad  earnings 359 

Bill  of  intervention,  Union  Pacific 391 

Interest  paid  on  Union  Pacific  collateral  trust  obligations 393 

Overdue  Union  Pacific  obligations 394 

Union  Pacific  receivership  balances 395 

Union  Pacific  overdue  bonds  and  coupons 396 

Union  Pacific  receivers'  financial  operations 397 

Income  from  Union  Pacific  investments 398 

Deficit  of  Union  Pacific  "  cripple  lines" 398 

Financial  operations  of  Kansas  Pacific 399 

Projects  submitted  by  Mr.  John  Rooney 447,  448,  451 

Financial  operations  of  Union  Pacific  receivers 453 

Memorandum  as  to  "other  expenditures" 453,454 

Union  Pacific  debt  to  the  Government 454 

Earnings,  etc.,  of  the  aided  and  nonaided  portions  of  the  Kansas  Division 455 

Union  Pacific  earnings  and  expenses,  monthly 456 

Communication  from  Treasury  Department  as  to  sinking  fund 457 

459 

o 


5  "3*1 


